The Financial Conduct Authority (FCA), The Pensions Regulator (TPR) and The Pensions Advisory Service (Tpas) have written to steelworkers that asked for a defined benefit (DB) pension transfer value warning them of the dangers of cashing out their savings.
In a letter sent to members of the British Steel Pension Scheme (BSPS) seen by FTAdviser, the regulators and the guidance body argue that “in most cases, transferring out of a DB pension scheme into a different type of pension arrangement will not be the best course of action.”
They say: “You can’t change your mind once you’ve transferred out of the scheme, and you will be giving up a valuable retirement income, plus although the BSPS will not impose any charges for the transfer, the receiving arrangement may charge very high exit and transfer fees.”
The letter, which is signed by Nicola Parish, TPR’s executive director for front-line regulation, Megan Butler, FCA’s head of supervision, and Michelle Cracknell, Tpas chief executive, is being sent to all scheme members which have asked for transfer values – according to the latest data available, around 13,000 steelworkers have made such request.
Steelworkers have until 22 December to decide whether 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).
The failed scheme has about 130,000 members of which 43,000 are deferred, which means transferring out of their pension is an option for them.
The regulators and Tpas conducted a meeting with BSPS members last week in Port Talbot - one of biggest steelworks in the world, which currently employs an estimated 10 per cent of the town's population.
In the document, the three bodies are urging steelworkers to make sure they get any costs about their pension transfer “explained in writing before making a decision as this could have a big impact” on their pension pots.
The letter also explains that individuals with savings over £30,000 are required by law to take independent financial advice from someone who is authorised advise on pension transfers by the FCA.
However, instead of guiding these steelworkers to the regulator’s register – which has been the target of criticism – the letter is suggesting these members should consult the Money Advice Service website to look for a financial adviser.
The entities are also urging members to visit FCA’s ScamSmart to check for possible frauds, or to contact the Tpas hotline for steelworkers in case of further questions.
They said: “Please carefully consider the scheme you’re thinking of transferring to and don’t be rushed into making a decision. Take your time to make all the checks you need – if a deal sounds too good to be true, it probably is.
“It’s your pension – so whatever choice you make, please make sure it’s an informed one.”