The Pensions Regulator (TPR) is working on "giving timely warnings" about pension transfer risks to scheme members, after it admits that it should have acted sooner in the British Steel scandal.
In its response today (11 May) to the Work & Pensions select committee report into the British Steel Pension Scheme (BSPS), published in February, the watchdog revealed it is working with the Financial Conduct Authority (FCA) and The Pensions Advisory Service (Tpas) to address this issue.
The Pensions Regulator said: “To protect members in the future, we are working much more closely and proactively in partnership with the FCA and Tpas to provide joint information and to give timely warnings to members who may also be considering taking a transfer from a defined benefit scheme when it may not be in their interests to do so.”
The regulator warned, however, that it cannot prevent members from exercising their right to a cash equivalent transfer value (CETV) to take advantage of the pension freedoms available to them.
“But we want to work with our partners to help ensure that members can make informed decisions,” it said.
Plans for British Steel owner Tata Steel to merge with rival ThyssenKrupp were waylaid until a deal could be reached to offload Tata's liabilities in the pension fund.
The Pensions Regulator gave its formal approval to a regulated apportionment arrangement (RAA) in August.
As a result, steelworkers were given 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, to be moved to the lifeboat Pension Protection Fund.
The scheme has about 130,000 members of which 43,000 are deferred, meaning transferring out of their pension was 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.
In its response to the report, The Pensions Regulator recognised "uncertainty regarding the British Steel Pension Scheme’s future may have contributed to the sharp rise in the level of CETVs requested”.
The watchdog said that it worked with FCA and Tpas to ensure that all those members who had requested a CETV quote, but hadn’t made a decision, received a joint letter via the trustee "making them aware of the potential impact of giving up guaranteed DB benefits for a more uncertain defined contribution (DC) return".
Additionally, the three organisations also sent a joint letter via the trustee to all those members who had recently transferred their scheme benefits to another registered pension arrangement, to ensure that members were aware of their options and where to go to for advice.
Nevertheless, The Pensions Regulator agrees that it “could have joined forces more quickly to reinforce these messages”.
The regulator said: “The review of member communications will look at what more could have been done to help members make informed decisions on transferring out of a defined benefit scheme.”