Defined Benefit  

Many steelworkers spent less than two hours with an adviser

Many steelworkers spent less than two hours with an adviser

A third of steelworkers (33.5 per cent) spent less than two hours with their adviser before deciding to transfer out of their defined benefit pension plan.

Rich Caddy, shift operations manager at British Steel in Teesside, and one of the former members of the British Steel Pension Scheme, polled 176 of his colleagues on their experience with their adviser.

The workers were spread across the county and all but one decided to leave their guaranteed pension plan.

Mr Caddy found 45.5 per cent of the former BSPS members spent two to four hours with their advisers before making the decision to leave the scheme, while the remaining 21 per cent spent more than four hours on the advice process.

He said: "I started the survey following posts from members that they seemed unaware of the options that should have been made available during the transfer process.

"We started a thread [in our Facebook group] discussing ongoing service and fees, where one member commented that he was not given a choice during the transfer.

"I was quite alarmed by this as most of the highlighted issues have been with regard to ‘contingent fees’, it seems that ongoing charges are being overlooked."

Alastair Rush, principal at Echelon Wealthcare, who has been involved in helping steelworkers with their pension decisions, said he suspects the time spent on the actual advice was even shorter than two hours in many cases.

He said: "I did a poll a few months back which suggested that nearly 80 per had a recommendation to transfer before 45 minutes had passed. 

"I’m conscious that some advisers did do the job properly, they must be seething. Most advisers seem to feel that somewhere in the region of five hours would be more appropriate. Most take 45 minutes just to do a fact find."

Mr Caddy also found the majority (67 per cent) of steelworkers who transferred out were younger than 55. There were even cases of individuals in their 30s, according to the data seen by FTAdviser.

Paul Stocks financial services director at Dobson & Hodge, said the low age of the transferees could be explained by the unique circumstances of this case.

About 130,000 steelworkers were asked in 2017 it they wanted to move their defined benefit pension pots to a new scheme being created, BSPS II, or stay in the existing fund to be moved into the Pension Protection Fund. For about 43,000 deferred members transferring out was given as an additional option.

About 8,000 members transferred out of the old scheme by October last year, with transfers collectively worth about £2.8bn.

Mr Stocks said: "These members realised that if they went into the PPF, a future transfer was impossible, and if they went into BSPS2, a future transfer would very likely result in a lower cash equivalent transfer value.

"As such, members are likely to have reached the conclusion that if they were ever going to transfer, they would likely need to do so before the scheme closed – therefore seeing a reduction in the average age."