Some members of the British Steel Pension Scheme (BSPS) who requested a pension transfer but where trustees failed to process in time, could see their quoted retirement pot slashed by around 20 per cent.
Around 130,000 steelworkers had to choose by 22 December 2017 it they wanted to move their defined benefit (DB) pension pots to a new scheme being created, BSPS II, or stay in the current fund, set to be moved into the Pension Protection Fund (PPF).
Some 25,000 members will end up in the pensions lifeboat, and it is an unknown number of this group who could see their pensions reduced.
If, despite making a transfer request in good time, the BSPS trustees fail to process it by tomorrow (28 March), the scheme is refusing to guarantee retirees will receive the quoted transfer figures.
This is because the transfers would then be processed under PPF rules, which will result in lower pensions for those not already retired as the lifeboat fund will only pay out a maximum of 90 per cent of rescued members' pensions in that case.
On 29 March, the old scheme enters into assessment at the pensions lifeboat.
A financial adviser told FTAdviser he is still waiting for a client transfer, which made his request to the pension trustees in December.
This particular steelworker, with a cash equivalent transfer value (CETV) of £370,000, could see this figure reduced to £296,000, the adviser said.
The estimate of a 20 per cent cut was made by Alistair Rush, principal at Rutland-based Echelon Wealthcare, who also had two clients in this situation.
He told FTAdviser that he had to write to Allan Johnston, BSPS chairman of trustees, to resolve the issue.
He told Mr Johnston that if the situation wasn’t resolved by the end of last week he and his clients would go into litigation.
He said: “I got a letter back the next day from the scheme secretary telling me that my two clients would have their original transfer values honoured, even if they went pass March 28.
“As it turns out, both should be transferred out before that day.”
A spokesperson of the BSPS trustees said the transfers are being processed in the order that they were received.
He said: “For members who have chosen to switch to the New BSPS, all valid transfer requests received on or before 16 February will be paid on the basis of the original quotation even if payment is after 28 March 2018. Requests received after 16 February will not be paid.
“Members who have not chosen to switch to the New BSPS who have submitted valid transfer requests on or before 16 February are also expected to have their benefits transferred based on the original quotation, although this cannot be guaranteed.”
He didn’t reply to questions on why guarantees were given to Mr Rush, and not to other financial advisers.
Stefan Zaitschenko, a former Tata steelworker who helps run a Facebook group for members of the old scheme, warned his colleagues about this particular situation in September.
He told FTAdviser that some members might have thought that it wasn’t necessary to make a choice because they were transferring out, which is not the case.
Nevertheless, he is receiving positive feedback from the scheme members in the Facebook group.
He said: “It does seem like BSPS trustees are trying to help those who have submitted applications to transfer but could end up in PPF after 28 Mar.”
Mr Zaitschenko has seen many posts saying that there is a Pensions Office worker who “has been great and helped all with info, and now transfers going through”.
Since March and until the beginning of February, the scheme has processed 2,600 pension transfers equating to a total value of £1.1bn, according to data revealed by the scheme trustees.
maria.espadinha@ft.com
