Concerns have been raised that those members who were denied a so-called buddy transfer, which would have allowed them to retain their protected pension age of between 50 and 54-years-old, could now face years of financial uncertainty if made redundant during the pandemic and its economic fallout.
Financial Adviser has learned of one steelworker who was made redundant in March aged 52, but as a result of being refused a buddy transfer when he left the BSPS, is unable to access his pension for another three years.
It comes amid a shrinking job market and increasing financial pressures as a result of the coronavirus crisis.
There is no obligation on a trustee to arrange a buddy transfer for members leaving a pension scheme. At the time of the BSPS restructure, trustees said they would not facilitate the process in light of the "additional administrative burden" on an already "increased workload".
This was despite a warning from Frank Field, then Labour MP and chairman of the Work and Pensions Committee, in 2017 that members would lose their protected pension age as a result of buddy transfers being ruled out on the grounds of administrative complexity.
Rich Caddy, shift operations manager at British Steel in Teesside and one of the former members of the pension scheme, said many steelworkers had been frustrated with the outcome.
Mr Caddy said: "Some steelworkers went to advice firms where advisers agreed to help them transfer with their protected pension, but the trustees would not allow a buddy transfer.
"It is understandable at the time they [the trustees] were dealing with a lot of admin, and we get that. But for the sake of them signing a piece of paper it now means redundant steelworkers are facing years of not being able to access their pension and potential financial uncertainty."
Had the steelworkers stayed in the BSPS and not transferred out, they would have now been able to access their pension at 50.
Buddy system
A block transfer, often known as a buddy transfer, is where at least two members of a pension scheme transfer at the same time in the same transaction to another registered pension scheme.
Members would often choose to do this type of transfer in order to hold on to any protected tax-free cash or protected retirement age after pension benefits had been transferred.
According to HM Revenue & Customs, there is no restriction on the type of registered pension scheme receiving the transfer. A personal pension scheme can receive a block transfer as long as the other block transfer conditions are met.
At the beginning of this year Mr Caddy called on the FCA to set up an independent review of transfer documents used with BSPS clients, warning many members felt uncertain of the choice made in 2017 and advice they received.
Since then the regulator has confirmed it means to write to almost 8,000 former members of the pension scheme urging them to revisit the advice they received and complain if they have concerns.
Steve Webb, partner at consultancy LCP and former pensions minister, suggested that allowing block transfers may have further complicated the scheme and its benefits.
He said: "I wonder whether what happened with British Steel was that when workers were given the right to either stay in BSPS and end up in the [Pension Protection Fund]; do a DB transfer; or to transfer to BSPS2, they wanted BSPS2 to be as simple as possible to administer and didn't want the hassle of people with different protected pension rights.
"In other words, I wonder – though I'm not sure – if the issue is that BSPS2 was not set up in a way where it was willing to receive transfers in with these special features attached.
"I guess BSPS would argue that people could have transferred out into another scheme if they had wished."
'Woeful lack of support'
BSPS members were asked to decide by December 2017 whether to move their DB pension to a new plan, BSPS2, or stay in the existing fund, which was then moved to the PPF as part of a restructuring of pension liabilities.
As a result about 8,000 members transferred out of the old scheme, with transfers collectively worth about £2.8bn.
But concerns about the suitability of the transfers were soon raised, leading to an intervention from the FCA that resulted in 10 companies – key players in the debacle – stopping their transfer advice service.
Some of these companies regained their permissions some months later, such as Mansion Park and County Capital Wealth Management, also trading as Pension Review Service.
Others such as Active Wealth went into liquidation, and claims against it have already arrived at the Financial Services Compensation Scheme.
Stephen Timms, chair of the work and pensions committee, said: "Years after the winding up of the British Steel Pension Scheme, we are still seeing the pernicious effects of the woeful lack of support given to pension savers at the time. That was, and remains, the responsibility of regulators.
"With so many people facing redundancy in an uncertain jobs market, being able to access their pension savings would surely be a lifeline for some former steelworkers. In that context, the trustees’ past decision not to allow buddy transfers purely on the grounds of administrative complexity surely looks questionable at the very least.”
The BSPS was approached for comment.
rachel.mortimer@ft.com & amy.austin@ft.com
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