Defined Benefit  

DFM in talks with steelworkers' pension over exit fee

DFM in talks with steelworkers' pension over exit fee

Gallium Fund Solutions, a Kent-based discretionary investment manager, is working on a solution for members of the British Steel Pension Scheme (BSPS) who want to withdraw their funds without paying an exit fee.

The company, which is regulated by the Financial Conduct Authority (FCA), was one of the managers appointed by the self-invested personal pension (Sipp) providers used by Active Wealth, an advice firm suspended from accepting any new clients on pension transfer business by the regulator.

FTAdviser reported in November that several steelworkers were transferring out of their British Steel pensions after meeting with an introducer firm called Celtic Wealth Management & Financial Planning, which, because it is unable to give advice, then referred these clients to Active Wealth.

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Several sources said Celtic was present at several roadshows put on by the British Steel scheme trustees, where the introducer proposed a flat fee of £1,500 to arrange their defined benefit pension transfer.

Steelworkers had 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).

Of the total members, 43,000 are deferred, which means that transferring out their pension is an option for them.

In a statement on its website, Gallium Fund Solutions stated: “Gallium and Vega Algorithms Limited (a research and technology company that advises Gallium Fund Solutions on its portfolios) are aware of concerns from investors transferring from the British Steel Pension Fund to the Vega platform service via their Sipps.

“In particular, that they had committed to a minimum five-year period and that there is a 5 per cent charge imposed by the underlying fund on investors who wish to exit early. We are in communication with the fund manager, investors and their advisers who wish to exit.

“We are working on a plan to resolve the issues surrounding the exit fee, which we hope to present to investors and their advisers in January.”

A spokesperson at Vega declined to comment on which solutions are being discussed.

The fund has an initial charge of 5 per cent and an annual charge of 0.5 per cent.

Stefan Zaitschenko, a former Tata steelworker who helps run a Facebook group for members of the old scheme with 5,100 participants, told FTAdviser that around 100 BSPS members have transferred their pension pots to a fund appointed by Gallium.

Eugen Neagu, head of financial planning at Montfort, who has been in contact with steelworkers, said that “Gallium used its discretion and invested all the pension funds in one fund named Newscape 5alpha Conservative”.

In his written submission to the Work and Pensions select committee inquiry on pension freedoms, Mr Neagu said: “The fund manager uses algorithmic trading, unlikely to be suitable for investors like the steelworkers who have low investment experience.

“In my opinion this fund is unlikely to be suitable for anyone, apart from very, very experienced retail clients.”