British Steel  

DB transfer victims lose up to 40% of compensation

DB transfer victims lose up to 40% of compensation
Source: Fotoware

Victims of defined benefit transfer mis-selling stand to lose an average 40 per cent of compensation payments thanks to changes in the way redress is calculated.

While this problem could affect every victim of DB transfer misadvice across the UK, the discrepancy has come to light because steelworkers at Port Talbot have been 'comparing notes' on the compensation levels they have received so far.

As a result, campaigners helping former British Steel Pension Scheme members to get redress have warned the way the methodology works means some people will win and some people will lose.

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This is because redress is based on variable factors such as market performance and inflation indexation. These values will be different on the first business day of every quarter - the point at which calculations are made for the rest of the quarter.

For example, one steelworker, Mr G, aged 35, was given a £27,000 payout from the FSCS in September last year. 

He had been advised to transfer out of the BSPS by S&M Hughes, trading as Crescent Financial, which went into administration in 2019, meaning all complaints fell back onto the FSCS.

But in January, a colleague of his, who is the same age, had been in BSPS approximately the same amount of time, and was also advised by S&M Hughes, received the full payout of £85,000 because his compensation was calculated after January 1 2021 - the first business day of the new quarter.

This means Mr G lost far more than 40 per cent of the potential maximum compensation.

Mr G said: "I emailed the FSCS to complain and they said it was because they had changed the calculation in January due to inflation indexation. The FSCS has said no to me getting any more.

"While I'm glad for my colleagues who are getting a better payout, I'm sad that my family are not going to benefit."

Al Rush, who is helping Mr G and many colleagues, warned the "arbitrary" calculation methodology meant a DB transfer victim getting compensation on December 27 could stand to lose 30-40 per cent of the potential pot, compared to someone who got compensation on January 3.

He called it a "lottery", adding: "Two guys living in the same street, having experienced very similar circumstances, feel they have been shafted once again by the system."

Rush added this problem was not confined to Port Talbot; it would affect everyone transferring out of any DB scheme and anticipating redress: Ford workers, NHS staff; anyone who is awaiting compensation. 

He said: "It will cost billions to put right. There are tens of thousands of people’s retirements at stake."

A spokesperson for the FSCS said: "We perform DB pension calculations using actuarially-approved pension calculation software. In its simplest terms, our hypothetical value of the DB pension scheme benefits is broadly a ‘cash equivalent transfer value’.