Another pension scandal: Incompetent financial advisers rip off steelworkers in the wake of the collapse of Tata Steel

Scunthorpe Steelworks Pic credit: Alan Murray-Rust

It is not just the DWP that can make a fine mess of pensions. A report just out from the National Audit Office reveals how thousands of steel workers have been swindled out of their their company pensions by incompetent and in some cases dodgy financial advisers.

Rocked by the sudden collapse of Tata in 2016 – brought out for a £1 by private equity group Greybull only to collapse again and be taken over by a Chinese firm, this uncertainty led to the government separating out British Steel’s pension scheme from the company to protect people who still had a final salary scheme.

But unfortunately some were offered to swap their pension for a far more risky package that no longer guaranteed a final salary pension.. The scheme now closed allowed steelworkers to retire on a final salary at 60 or 55 if they were made redundant. Who today would not welcome such a good deal.

But some 8000 steelworkers chose to use their right to transfer out of the pension scheme. Some 95 per cent of them were advised by independent financial advisers. Nearly half the steelworkers were given dud advice.

The workers were given only a short window to transfer by companies that had little experience in dealing with such a large number of people. The companies also made a shed load of commission for themselves in handling the deals.

The report concludes that the workers in places like Teesside and Scunthorpe were vulnerable to pension mis selling by financial advisers. Already spooked by whether they would keep a job, they thought it was a good idea to opt for a private pension. They have now lost an average of £82,600 – with some losing up to £489,000. The maximum claim they can make is £85,000 or £50,000 of the firm collapsed earlier. The total amount lost comes to £18m.

Industrial scale of the rip offs

The industrial scale of the rip offs can be shown by how many firms have been fined . The Financial Conduct Authority (FCA) has issued  £1.3 million of fines and has 30 more enforcement investigations ongoing. It has also changed its approach to regulating the pensions advice market in response. Many of the advisers at the time were one horse businesses -too small then to be regulated.

The investigation has also revealed how badly bodies supposed to protect ordinary people can cope with the problem – The FCA and the Pension Ombudsman- do not come out well – just as the DWP and Parliamentary Ombudsman don’t do a good job in rectifying complaints. The FCA has now sharpened up its act as a result of this – and not before time.

Just like the Parliamentary Ombudsman the process to get redress is complex and difficult to understand, Perhaps it is no wonder that only only 25% (1,878) of members who transferred out of the BSPS [ British Steel Pension Scheme] have sought redress through complaints. The FCA is yet to decide whether to implement a consumer redress scheme for BSPS members, in which all firms involved would have to review their advice and potentially offer compensation.

The report reveals that many don’t even realise they can get redress – so bad have the authorities been in not telling them. Many of them won’t be able to recover all the money because the firms have gone bust and will have to rely on a national compensation scheme.

Meg Hillier chair of the Public Accounts Committee

Meg Hillier, chair of the Commons public accounts committee, sums it up well:

British Steel pension members were badly let down by placing their trust in the very system designed to protect them.

“The handling of the BSPS case was a failure from top to bottom. Many of the pension advisory firms gave bad advice to customers and the FCA, whose job it is to regulate these firms, was asleep at the wheel.

“Efforts to improve the pension advice market and provide compensation will be too little too late for many BSPS members. “The bottom line is that many pension members have been left out of pocket and seen the rewards for their years of hard work melt away”

The Financial Conduct Authority issued this statement:

“In a letter sent today, the FCA has set out its expectation that firms in the scope of a potential redress scheme should retain assets and should not try to avoid their responsibilities.

The FCA has warned it will take such action as it deems necessary if a firm attempts to avoid redress liabilities. 

Former BSPS members should continue to check whether they received unsuitable advice and find out how to complain at fca.org.uk/bsps.

Firms should continue to progress any existing FCA required Past Business Reviews and engage in any ongoing enforcement investigations or supervisory work connected to the British Steel Pension Scheme.”

There seems to be another moral of this story, Be wary of silken tongue financial advisers and research very carefully what you want to do with your pension. Remember not all of them are competent and some are just plain dodgy.

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How EU law hobbled Parliament investigating worst mis-selling scandal in history

CROSS POSTED ON BYLINE.COM

The scandal of the mis-selling of Personal Protection Insurance is well known as one of the worst financial scandals in history.

Some 12 million people have received £22.5 billion in compensation from  unnecessary Payment Protection Insurance (PPI) schemes sold to gullible people.

And to compound it a National Audit Office report  (NAO) last week highlighted how cold calling claims management companies had ripped off £3.8 billion and £5 billion of the compensation paid for work which could be done by claimants for free.

What might also shock people – particularly in the current debate over whether we should quit the European Union – is the revelation by the NAO  that it could not complete the investigation  to its satisfaction because a European Union directive banned Parliament from getting confidential information. I have written about this in this week’s Tribune magazine.

The situation is this. As well as finding out the scale of the problem the NAO wanted to know -on behalf of you the taxpayer – whether the public watchdog the Financial Conduct Authority had done its job its ensuring the many banks and financial organisation had smartened up their acts to prevent a repetition.. Particularly as they are fears that there could be a new scandal involving the mis-selling of annuities and pension schemes.

The FCA had collected this information but refused to hand it over to Parliament’s watchdog.. The reason it turned out is that the Financial Services and Markets Act 2000 combined with EU law restrictions prevents them obtaining the information from the FCA.

As the NAO said: “ This limits our ability to reach a judgement on the FCA’s value for money, as we could not carry out a full assessment of the effectiveness of the FCA’s actions…. we have only limited evidence on how the FCA’s actions have changed firm behaviour, and how effective its redress schemes have been in providing compensation to consumers.”

The NAO tried to get around this by contacting some 20 banks and financial companies and asking them to volunteer to disclose the information. Fifteen did reply but five including two of the companies with the largest number of complaints, Barclays and British Gas Services, declined to provide any information.

The 15 who did reply included HSBC Bank plc; Lloyds Banking Group; MBNA Limited; Nationwide Building Society; NFU Mutual Insurance Society and Santander UK plc.

But a NAO spokesman said: “The information we got from the others while helpful, didn’t enable us to carry out a full assessment of the effectiveness of the FCA’s actions.”

What  is the EU doing putting  the interests of banks above people and Parliament. The NAO is now asking the Treasury to pass a law allowing it some access to this information but it will have to bow to EU law on how much can be revealed.

I am not a supporter of Brexit but it seems to me there is something very wrong here that needs changing. I am surprised that the vociferous campaigners for a No vote have not latched on to this – even if it is in the small print of the report. The NAO is obviously an independent source with no axe to grind over Europe. But it has provided campaigners who say we are not in control of our country with a very potent example on a very serious issue.