Andrew Bailey, chief executive of the Financial Conduct Authority, has been asked to force the new British Steel Pension Scheme to compensate steelworkers who were mis-advised to transfer out of the old scheme.
Alastair Rush, principal at Rutland-based IFA Echelon Wealthcare, today (February 26) met with Mr Bailey and told him the new British Steel pension fund could share the cash injection it received from Tata Steel Group with mis-advised steelworkers who are worse off for being told to transfer out of the old scheme.
The FCA is not technically in charge of regulating the scheme, which is being authorised by the TPR. But both regulators are working together on the British Steel case.
In August 2017, The Pensions Regulator approved the British Steel Pension Scheme restructuring, which was done through a regulated apportionment arrangement.
Designed for multi-employer schemes, under this arrangement the participating employer in a defined benefit pension scheme stops participating in the scheme.
The departing employer's share of the employer debt that would otherwise be due to the scheme is then split among one or more of the remaining participating employers.
In this case, the BSPS received £550m from the parent Tata Steel Group, significantly more than it would receive in insolvency, and a 33 per cent equity stake in Tata Steel UK.
From the total of 125,000 scheme members, around 42,000 were deferred, which means they could transfer out.
Indeed, some 9,000 did exit the scheme, Mr Rush claimed.
Assuming these numbers, the "potential demand placed upon the £550m cash and equity injection for the new BSPS is going to be correspondingly and markedly far less onerous,” Mr Rush argued in a letter sent to MPs and regulators, which FTAdviser had access to.
Mr Rush, who created Operation Chive - Counselling, Help, Information, Volunteer Exchange – to provide free counselling to steelworkers, is suggesting that a pro rata element of the £550m and equity stake in Tata Steel UK should be allocated to help the mis-advised steelworkers who transferred out of the old scheme.
He said: "The argument may be made that the money wasn't intended for those who left, but I contend that it was.
"There was no stipulation either way how the money should be used – just that it was determined to be an appropriate amount for all scheme members."
He added that if it was known in advance that 9,000 members would be leaving, a "good case would be made for diminishing the value of the cash and equity anyway".
Mr Rush added: “Currently, everything is working in the new BSPS favour.
"Mortality assumptions have changed It is becoming apparent that longevity won’t be continuing an upward trajectory, and prudent asset allocation means that the scheme is de-risked further.
“So, to use an analogy, the money that was allocated to the scheme may be spread far more thickly than previously anticipated. Using this money to help those mis-sold is morally justifiable."
The Financial Services Compensation Scheme has been dealing with complaints from steelworkers who claim they were wrongly advised to transfer out of the pension scheme.
The FSCS announced in January that BSPS members won’t receive a reduced discount rate for compensation calculations in claims relating to liquidated advice firm Active Wealth.
Martin Bamford, chartered financial planner and managing director at Informed Choice, argued that BSPS members "were let down by their employer, the scheme trustees, regulators and a handful of rogue advisers".
He said: "It is in no way acceptable that the FSCS pays for their losses, as this cost burden then falls on the clients of the majority of good financial advisers, who had absolutely nothing to do with this whole debacle.
"The scheme and regulators on the other hand, who admittedly have no money of their own, should be taking far more responsibility in this case."
Mr Rush confirmed he will be having further talks with the FCA, The Pensions Regulator and FSCS, where this matter will be discussed further.
A spokesperson at TPR said: “We are working closely with the FCA, Single Financial Guidance Body and others to help ensure pension savers are less likely to make transfer choices which are not in their best interests.
"We commissioned a review, carried out by Caroline Rookes, to look at lessons that can be learnt in relation to communications to members in similar circumstances.
"We are looking at the proposal put forward by Al Rush and are happy to meet him to discuss our views. We will not comment further at this stage."
A spokesman for the FSCS said they were not aware of any meeting scheduled with Mr Rush.
A BSPS trustee declined to comment on Mr Rush's proposal.
The FCA has been approached for comment.
maria.espadinha@ft.com
