Within the past three years we saw approximately 8,000 members transfer out of the British Steel Pension Scheme.
Government rules state that if the value is more than £30,000, then the transfer could only be processed following regulated financial advice from a pension transfer specialist.
We were of the opinion that, following this safeguard, members would be protected and feel safe in the knowledge that the advice received is covered by a governing body, and provided with integrity.
Soon after the transfer window closed, we started to hear reports of members from Port Talbot receiving poor advice, which led to investigations carried out by the Financial Conduct Authority and 13 advice firms surrendering pension transfer permissions.
The FCA later requested advice firms submit records of transfers, followed by an alarming report showing less than 50 per cent of the advice given was deemed suitable.
Although the regulators are now enforcing rules within the advice sector, where is the consumer support?This has resulted in members feeling anxious, not knowing which side of the 50 per cent they fall into.
Should the FCA contact these members directly where they have identified poor advice?
This is the recent guidance given to members by the FCA: "Any former BSPS member who was given financial advice to transfer out of the BSPS, and is unsure if the advice was suitable, should make a complaint. Firstly, they should make the complaint to the firm that provided the advice."
The problem for members is knowing the difference between suitable or unsuitable, otherwise the complaint can only be made on the grounds of the client being ‘unsure’, and questioning the advice of a regulated financial professional.
Further work was carried out by the FCA in 2018 which identified many of the issues.
This resulted in recommendations given to advice firms on how to conduct future business, but nothing with regard to the client, and how they may be affected, bearing in mind that the decision to transfer was irreversible.
If a car manufacturer discovers a generic fault, the customer is informed and the vehicle recalled for a repair. Ignoring this will only escalate the issue.
What was the drive behind so many transfers taking place?
For many it was related to pension freedoms, but for others it was potential insecurity, driven by changes that were being made by the scheme which would result in members seeing reduced benefits, and the risk of future changes and sponsor support.
There was also the fear that the scheme could, at some point, transfer to the Pension Protection Fund where benefits would be reduced even further, even though in some cases the PPF benefits would have been more favourable.
And what was the drive behind advisers wanting to accept this ‘high risk’ business?
A total of just over £3bn worth of transfers were processed, while the average transfer fee was charged at 1 per cent (£30m worth of transfer advice), the ongoing advice is usually charged at 0.5 per cent, so a total of circa £15m a year in annual fees.
Although the regulators are now enforcing rules within the advice sector, where is the consumer support?
Transferred members are not chasing compensation, we just want confirmation that the advice we received is suitable, and to be able to move forward without doubt.
This is not only in the client interest, but would also help to restore confidence in the financial sector.
Rich Caddy is shift operations manager at British Steel in Teesside
