The 2017 British Steel Pension Scheme (BSPS) scandal was among the most known in UK history.
Thousands of steelworkers were encouraged to transfer out of their final salary pension scheme into inferior pension arrangements, resulting in significant financial losses for many.
The situation raised concerns about the quality of advice provided to BSPS members, prompting the Financial Conduct Authority to launch an investigation (FCA).
This article will delve deeper into the British Steel Pension Scheme fiasco, revealing what happened and what pension scheme members should do if they’ve been affected.
“Thousands of steelworkers were encouraged to transfer out of their final salary pension scheme into inferior pension arrangements, resulting in significant financial losses for many.”
What Happened to The British Steel Pension Scheme?
After losing £2 billion in only five years following the acquisition of British Steel, Tata Steel UK decided in March 2016 that it could no longer cover such growing losses. It wanted to explore its options for restructuring the business and achieving a quick sale of Tata Steel UK.
Questions were raised over the future of the BSPS and whether it should/could be sold as part of Tata Steel UK or whether it needed to be separated from the rest of the business – reflecting the government’s current thinking at the time.
A Government consultation was launched in May 2016 to explore how to help the BSPS.
One of the proposals was to allow the trustees to reduce indexation and revaluation on future accrued pension rights.
For this to be plausible, the legislation would need to be amended to allow detrimental changes to accrued rights without members’ consent (Pensions Act 1995, s67).
Whilst the trustees said that this was in the best interest of its members, many commentators at the time expressed concerns, in particular, the implications of undermining the fundamental principle that once made, pension promises cannot be changed retrospectively.
The Advice on Pension Transfers was “woefully inadequate”.
In August 2017, The Pension Regulator said it had approved a proposal from Tata Steel UK to restructure the BSPS through a Regulated Apportionment Arrangement (RAA), which included £550 million from the Tata Steel Group.
The deal, which received formal approval on the 11th of September 2017, contained provisions allowing scheme members to choose from 3 options.
Option 1 – They could remain in the current scheme, which would transfer to the Pension Protection Fund (PPF).
Option 2 – They could switch to a new scheme (the New BSPS) which provided the same benefits but with lower future increases.
Option 3 – Any member with more than a year before retirement could transfer their rights.
That is where the real issues arise.
The Impact of the Scandal on Pension Scheme Members
In a report published in February 2018, the Work and Pensions Committee (WPC) said that the quality of communication to BSPS members explaining their options was ‘woefully inadequate’. It noted that the Financial Conduct Authority has ‘done too little, too late’ to address concerns about the suitability of advice given to members considering transferring their pensions.
Amazingly, an independent review by Caroline Rookesit considered it a ‘good thing’ and stated that 80% of members had made an active choice and that the majority of members were happy with the choices that they had made.
“Like bees to a honey pot.”
Now, let’s put this into context. The WPC said that the communication to members was inadequate, yet the Rookes review said it was a ‘good thing’ that members had made a choice and seemed happy.
Given the above, it is clear that most members needed more financial planning experience to decide what would be best for their personal circumstances.
The fact that members were happy with the choices is a testament to the poor communication that they received!
Anyone unfamiliar with how different types of pension work (let’s face it, most of us) wouldn’t be comfortable making such an important decision without professional financial advice.
As you can imagine, like bees to a honey pot, hoards of IFAs and future financial planning businesses started swarming around members eager to speak to them about transferring their pensions.
This signed the beginning of the pension transfer fiasco, which proved to be a nasty sting in the tail for many.
The impact of these final salary pension transfers on members was financially and emotionally devastating.
Many members suffered significant financial losses, with some losing their entire life savings.
“The fact that members were happy with the choices is a testament to the poor communication that they received!”
The Regulatory Response to the Scandal
In response to the scandal, the Financial Conduct Authority (FCA) launched an investigation into the conduct of financial advisers that recommended BSPS members transfer out of the scheme and invest their pensions in high-risk investments.
They found that some financial advisers failed to consider their client’s circumstances and need when providing advice and were most likely induced to recommend transfers out of the BSPS.
New rules were then enforced to ensure that all financial advisers acted solely in their client’s best interests. They were all required to thoroughly analyse a client’s financial situation before providing advice on pension transfers.
Those financial advisers found guilty were banned and fined for providing unsuitable pension transfer advice.
“financial advisers failed to consider their client’s circumstances and need when providing advice.”
In conclusion, the British Steel Pension Scheme scandal of 2017 shook the pension sector dramatically.
Thousands of pension scheme members encouraged to transfer out of their scheme and invest their pensions into high-risk investments suffered significant losses.
The scandal highlighted the need for greater regulation of the pensions industry to prevent similar scandals from happening again and the importance of seeking legal and financial advice before transferring a final salary pension or defined benefit pension.
How Can Money and Me Solicitors Help You with a Pension Mis-selling Claim?
If you think you received unsuitable advice to transfer out of your pension scheme, call us on 01925859625, email Info@moneyandmesolicitors.co.uk or request a call back.
Filling a compensation claim can be quite a complex task. That’s why delegating an experienced team to do it for you is what will help you increase your chances of filing a winning claim.
“At Money and Me Solicitors, we have successfully helped hundreds of victims of the British Steel Pension Scheme pursue compensation claims.”
We will typically begin by:
1 – Assessing your case
2 – Reviewing any relevant documentation
3 – Establishing whether there is a claim for compensation
After assessing your valid case, we will gather the evidence, liaise with the pension provider, and work to achieve a settlement on your behalf.
This practice can involve recovering any lost money by way of compensation that you might be entitled to.
Money and Me Solicitors’ Successful British Steel Pension Transfer Claims
At Money and Me Solicitors, we have secured significant compensation for hundreds of victims of the British Steel Pension Scheme scandal who suffered financial losses due to unsuitable advice to transfer out of their pension scheme.
Here below are two case studies of Money and Me Solicitors’ successful British Steel Pension Transfer Claims: