Defined Benefit 

British Steel IFA transferred 64 clients in one-off deals

British Steel IFA transferred 64 clients in one-off deals

Active Wealth – the IFA the Financial Conduct Authority told to stop advising on defined benefit (DB) pension transfers after advice given to steelworkers – transferred 64 clients out of the British Steel Pension Scheme (BSPS), none of whom the IFA provided ongoing advice.

Darren Reynolds, director of Active Wealth, revealed the details in a letter sent to Labour MP Frank Field, chair of the Work and Pensions select committee.

Mr Reynolds said: “Active Wealth advised approximately 300 BSPS clients, of which 64 proceeded to transfer out of the BSPS into an alternative pension arrangement.

“In all cases, clients were advised that if their primary aim was to maximise a guaranteed income in retirement, then their interests would be best served by remaining in a final salary pension scheme, such as the BSPS.”

Some of these clients saw their pension pots being invested in self-invested personal pension (Sipp) providers, such as Momentum Pensions, and managed by Gallium Fund Solutions, a Kent-based discretionary investment manager, which charge exit fees.

Around 130,000 steelworkers had to choose to move their DB pension pots to a new plan being created, BSPS II, or stay in the current fund, which would be moved to the Pension Protection Fund (PPF), by 22 December.

Of the total members, 43,000 were deferred, which meant transferring out their pension was also an option for them.

FTAdviser reported in November that several steelworkers appeared to be transferring out their pensions after being lured by cheap deals by unregulated introducer firm Celtic Wealth Management & Financial Planning, which then referred the clients to advice firm Active Wealth.

Mr Reynolds revealed that none of the BSPS clients “have signed up to receive an ongoing advisory service and they have not therefore committed to paying any ongoing adviser charges”.

He said: “Active Wealth’s practice has been to get in touch with its clients two years after they initially became a client of the company and, at that stage, to determine whether they wished to engage Active to provide an ongoing advisory service.

“They would, of course, be provided with details of the cost of the service at that stage as part of the facts they needed in order to make a properly informed decision.”

Financial advisers are divided over whether transferring clients in such one-off deals without providing some form of ongoing advice is good practice.

Alan Chan, director and chartered financial planner at London-based IFS Wealth & Pensions, argued that “although ongoing advice is highly recommended in such cases, it is a separate service and should not be mandatory”.

He said: “As long as the advice to transfer was suitable and meets the clients’ objectives then I don’t see there being a problem post-transfer if no ongoing advice is selected or agreed.  Ultimately you cannot force anyone to take up a service they don’t want and don’t need.

“I would be more concerned if every client was forced down the route of taking up ongoing advice as a result of the transfer, which I’ve seen a number of firms insist on, otherwise they will not proceed with the initial advice.  I would not consider this to be a client-centric proposition.”

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