British Steel Pension Scheme members were lured into transferring out of the scheme and away from the new BSPS2 by promises of 'plunder funds' and 'property income'.
Documents being reviewed by law firm Clarke Willmott, which is helping approximately 700 former members of the BSPS to recoup losses caused by following advice to transfer out, have revealed "shocking" reasons presented to clients by their advisers.
According to Philippa Hann, partner at Clarke Willmott, one steelworker was presented with his cash equivalent transfer value and told he could benefit from taking his 25 per cent tax-free lump sum and use it as a "plunder fund".
"He was advised to take out an enormous sum in order to 'plunder' it to fund his lifestyle. 'Why leave it in a tax-free environment to grow, when you can take it all out, make it all taxable and [use it in this way]?'.
"The word 'plunder' should never have been used, let alone in an official recommendation to transfer."
Fellow Clarke Willmott partner Laura Robinson came across the case of another steelworker who wished to take just £12,000 a year from age 60 - well within the annual tax allowance.
"He would have had £20,000 guaranteed for life from age 56 from the BSPS. But the adviser didn’t mention that... instead, he recommended the transfer so the steelworker could access tax-free cash to buy a rental property ‘to secure some retirement income’."
When asked whether the regulations around taxation of rental properties for landlords, the rules governing landlords' responsibilities, and the CGT liability from selling the second home were explained to the client and set out in documents, Robinson said "no surprise - no".
Hann added: "The purpose was to transfer these people out so the adviser could benefit. It was in the adviser's interests."
FTAdviser In Focus has created a Guide to British Steel: What lessons can we learn?
It qualifies for an estimated 60 minutes' worth of CPD and can be found here: https://www.ftadviser.com/pensions/2021/02/24/what-lessons-can-we-learn-from-british-steel/