Lawyers representing former members of the British Steel Pension Scheme have warned those mis-advised to transfer out of the scheme would be "feeling the sting now more than ever" amid the coronavirus pandemic.
Law firm Clarke Willmott sounded the warning bells over members who received unsuitable advice to opt out of the "risk free environment" of the scheme and were now exposed to the extreme market volatility driven by the virus outbreak.
Stephen Searle, partner at Clarke Willmott, said: "The former members of the BSPS who were advised to transfer out rather than move into the new scheme (BSPS2) or indeed the Pension Protection Fund, which both provided ongoing guarantees, will be feeling the sting now more than ever.
"No-one can predict exactly what will happen in the world, or what the effects of it might be on investment returns. Coronavirus is just one of many ‘unforeseeable’ events that could have come along at this point to derail these members’ journey towards retirement.
"One thing is certain: if their goal was a pension fund of a certain size by the time they came to retire, they are now much further away from it. No-one knows how long the markets will take to recover."
Mr Searle said whilst pension investors would generally have diversified funds, the market drops were a "powerful reminder" of the value of final salary and other defined benefit schemes.
He said: "Those who transferred funds out may now have a personal pension plan. In a personal pension plan, they will be entirely responsible for investing the fund and will bear all the investment risk.
"Financial advisers can advise, and investment decisions can be delegated to a fund manager, but involving them has a cost. This must be offset by slightly higher returns – and the member still bears the risk."
The British Steel pension transfer fallout began in 2017 when members, largely based in south Wales, were asked to decide what to do with their pensions as part of a restructuring process of the defined benefit scheme.
Almost 83,000 of the 130,000 members chose to move into a new scheme, some 39,000 were put into the PFF and a further 8,000 transferred out of their defined benefit scheme - with transfers collectively worth about £2.8bn.
Concerns about the suitability of the transfers were soon raised leading to an intervention from the FCA, which resulted in 10 firms — the key players in the debacle — stopping their transfer advice service.
Clarke Willmott is currently representing hundreds of British Steel workers and acting against 60 firms linked to the scandal. It is also helping them bring claims through the FSCS.
The FSCS has previously reviewed its approach to calculating compensation after steelworkers and MPs complained that the method used was too narrow, focusing on the point when the workers transferred out rather than looking at their "pensions journey".