British Steel Pension Scheme (BSPS) members are struggling to get a financial adviser to take them as a client and advise them on a defined benefit (DB) pension transfer amid concerns about a tight deadline and future liability.
Around 130,000 steelworkers will have to choose to move their defined benefit (DB) pension pots to a new plan being created, BSPS II, or stay in the current fund, which will be moved to the Pension Protection Fund (PPF).
Of the total members, 43,000 are deferred, which means that transferring out their pension is also an option for them.
The deadline for these transfers is also on 11 December.
But several advisers are refusing taking these clients in, as they are at full capacity or consider that there isn’t enough time to give proper financial advice.
There is also widespread concern among advisers about how suitable it is to recommend the steelworkers to transfer out of their defined benefit scheme and in doing so lose a guaranteed income for life.
A steelworker post in a closed Facebook group, shared on Twitter, said: “I’m struggling to believe it. But five reputable financial advisers that have been recommended to me are at capacity.
“I feel like I’m chasing the last bus that’s accelerating away. Can you please recommend advisers to me that you have faith in?”
Other scheme member, in his twitter account, revealed that he is “in panic mode”.
He said: “Deadline is in two weeks, received [cash equivalent transfer value] CETV a month late, can’t get that time back and BSPS are impossible to contact.”
There are also questions about the reputability of the advice being given to steelworkers.
FTAdviser reported this week that several steelworkers appear to be transferring out their pensions after being lured by an introducer firm called Celtic Wealth Management & Financial Planning.
Several sources have said the firm has been present at several roadshows from the scheme trustees, which are attended by members wanting more clarifications about their pensions and proposing to them a flat fee of £1,500 to arrange their DB transfers.
In the meantime, it was revealed that the Work & Pensions select committee will be questioning financial advisers about the advice given to steelworkers to transfer their pensions out.
Stefan Zaitschenko, a former Tata steelworker who helps run a Facebook group for members of the old scheme with 4,300 participants, told FTAdviser that there are “a lot of requests on the group from people looking for good advisers”.
“We have seen that many of the good IFAs are quite rightly shutting their doors to any additional business, because they can't provide the professional service they need to any more clients.”
Paul Stocks, financial services director at Dobson and Hodge, is one of these professionals.
For a transfer to be approved in time, an adviser needs to get the relevant paperwork to British Steel by 11 December, which needs to go through the receiving scheme, he explained.
He said: “We did a case last week with a company that had a five-day turnaround, but this isn't quite common, it was quite a specific case. That for us is cutting it very close.
“We stopped taking cases three weeks ago, because we are working to a deadline of the end of this month to get paperwork of our desk on the way to British Steel.
“And to give DB advice, in my opinion, you can't do it in four days, it takes four weeks at least to do it properly.”
Steve Carlson, chartered financial planner at Cardiff-based Carlson Wealth Management, has taken on some of the steelworkers as clients.
However, he had to be very selective with the clients that he took on, as he doesn’t “have the capacity to deal with every enquiry”.
He said: “Giving the right advice to someone considering their options with a DB scheme should involve a thorough analysis of their entire situation, which is quite a lengthy process.
“It doesn’t take too many of those cases for a reputable firm to reach capacity.
“With many DB specialists pulling out of the market after the recent Financial Conduct Authority reviews, and the enormous demand for advice from BSPS members and members of other schemes in general because transfer values are so high, it doesn’t surprise me that people are finding it hard to get advice.”
Wealth manager St James Place, however, is still taking in steelworkers as clients.
A spokesperson said: “We have strict guidelines in place regarding the advice provided by partners in relation to DB pension plans.
“We are still accepting transfers and will look at these on an individual basis, as we would for any transfer.”
More than 7,000 members of the scheme have requested a transfer value quotation between April and September this year, with more than 700 requests totalling more than £200m being concluded or processed during that period.
Adding to this, the FCA is concerned about the advice being given to these individuals, and has an ongoing programme of visiting advisers in Wales, where there is little evidence of financial advisers suggesting anything other than transfers to the members.
According to estimates from advice firm Montfort International, only 15 per cent of BSPS members who are currently under pressure to decide what to do with their retirement nest egg should transfer out their pension.
According to Mr Zaitschenko, this process “should be the biggest transfer from a pension fund in such a short period that has ever happen”.
He said: “We know that the total liabilities of the people that can transfer out is about £6bn, so if 25 per cent transfer out, we are talking about £1.5bn.
“Based on what we are seeing, the total transfers will be around this figure.”
maria.espadinha@ft.com
