British Steel  

Pensions freedoms and BSPS created 'financial feeding frenzy'

Pensions freedoms and BSPS created 'financial feeding frenzy'

The industry has called for the government and regulators to play a more "active role" in protecting pension savers as it responded to the National Audit Office's scathing report on the British Steel saga.

A report published by the NAO today (March 18) investigated the causes and issues that led to the British Steel Pension Scheme scandal and outlined measures to prevent it from happening again.

Commenting on the report findings, MP Nick Smith said the BSPS scandal was “a perfect storm”.

“New ‘pensions freedoms’ and trouble at Tata Steel facilitated a financial feeding frenzy,” he said. “Pension sharks swarmed on steelworkers, ripping them off through bad advice.

“The government had introduced the requirement of receiving financial advice before transferring out of a scheme and yet most advisers would only get paid if a transfer took place, a financial incentive to recommend transferring out.”

Steelworkers were badly let down, “left at the mercy of rogue advisers, scammers and shameless introducers” without any of the necessary support or advice they needed, he explained.

Smith argued that the Financial Conduct Authority “failed to get a grip on this scandal at the outset” and the regulator’s focus on what happens in the City of London meant it missed the “large scale rip offs” that were taking place in South Wales and the north of England.

“It was totally unprepared for this scandal, with scarce insight into what was happening in the BSPS. By the time they got involved it was too late,” he said. “Over the subsequent four years, communication has been woeful. Not nearly enough was done to make steelworkers aware of their rights to raise complaints and seek compensation.

“Not enough has been done to hold those responsible for this scandal to account, not just the advisers but also their introducer cronies who have so far evaded action. I believe that many of these instances involved conspiracy and possibly warrant prosecution as criminal cases.”

Elsewhere, Stephen Timms, MP and chairperson of the Work and Pensions committee, said the NAO report showed that BSPS members were “failed by an inadequate financial regulation framework”.  

“This left them exposed to exploitation by poor and misleading advice,” he said. “The NAO’s finding that almost half of all advice given in British Steel pensions cases was unsuitable is shocking.”

The FCA has since put in place tightening measures aimed at improving the regulation of the pensions advice market, such as a ban on charges where advisers are paid only if a transfer proceeds, and along with the Financial Ombudsman Service and Financial Services Compensation Scheme it is attempting to remedy the financial detriment suffered by BSPS members. 

Timms said he welcomed the FCA’s regulations and punishing bad actors, but argued it was not right that the victims of this neglect and manipulation have lost out on millions of pounds of redress because of legal limits and company defaults.