Emma Ann Hughes  

Right response to pension transfer mis-advice scandal

Emma Ann Hughes

Emma Ann Hughes

The British Steel Pension Scheme and the employers failed to make sure that all workers had access to high quality impartial advice and information about their pensions.

They failed to make sure they had enough time to make calm, well-informed choices about whether or not to transfer. 

These were the conclusions of the Work and Pensions select committee's report into what happened when British Steel pensioners faced the dilemma of to leave their pot where it was or transfer out.

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The committee rightly concluded lessons need to be learnt around processes and timings.

The House of Commons’ Work and Pensions select committee report looking into the closure of the British Steel Pension Scheme (BSPS) found scheme members were not given enough information before being rushed into a decision.

I would argue they were given more than enough information - it just wasn't the right kind of information and perhaps in too overwhelming a quantity to enable them to reach the right conclusion for their circumstances.

The process for members to decide whether to move to the new British Steel Pension Scheme (BSPS2) was hurried and the communication far too complex with not enough bespoke information. 

These factors contributed to many members transferring out of the scheme to a defined contribution arrangement, which was not in their best interest.

Nearly all members would be better off moving to the BSPS2, but as formal consent from members was required to move to the new scheme, more than 20,000 of the 124,000 members will now enter the Pension Protection Fund (PPF) as they did not respond to the communication that was issued to them. 

Looking ahead, at the uncertain landscape of Britain approaching Brexit, there will no doubt be similar cases to the British Steel pensioners in the near future.

Lessons need to be learnt around processes and timings so that communications are simpler and there is more time for individuals to make a decision. 

The right response here is not a regulatory requirement for more information to be flung at those who had a final salary pension and therefore may never have bothered to really think about saving for retirement before.

It is vital for regulators to recognise what engages and gives people a balanced picture about what their options are and regulate so that it is this assistance that can be delivered to those who need it.