Not my words but those of Frank Field, the chairman of the Work and Pensions Select Committee, who has been outraged by the mistreatment of British Steel pensioners whose dreams of a happy retirement have been ruined.
These pensioners, who gave decades of loyal service to the steel industry, have been failed by our flawed regulatory regime. It’s a familiar, sad story.
Mr Field has written to the Financial Services Compensation Scheme (FSCS), following concerns expressed by the Financial Conduct Authority’ (FCA), about the compensation on offer to British Steel pensioners who were “mis-advised” to transfer their pension savings into unsuitable investments by advice firm Active Wealth.
The Committee’s inquiry into pension freedom and choice revealed that upwards of £40 million was transferred out of BSPS on the advice of one firm, Active Wealth, alone.
Its interim report into the British Steel Pension Scheme described how “many BSPS members were shamelessly bamboozled into signing up to ongoing adviser fees and unsuitable funds characterised by high investment risk, high management charges and punitive exit fees”.
The highest transfer value on advice of Active Wealth was £790,404, and the average was £398,347.
Active Wealth claimed that, of 300 BSPS clients they advised, “around a third” acted on their advice to move their savings out of the “gold-plated” BSPS scheme.
Active Wealth was then barred from transfer advice and it entered creditors’ voluntary liquidation in February last year.
BSPS members who lost some or all of their savings as a result of this “mis-advising” can be entitled to up to £50,000 in compensation.
However, correspondence from the FCA - which was studied by MPs - suggested that the victims may be being under-compensated.
In a response to a letter from Mr Field, the FSCS said that, while it is changing its approach to compensation in the BSPS case, and will revisit the 15 compensation claims it has already dealt with, it rules out the FCA’s advice that that it should regard this case as “unique”, and waive FCA rules on calculating redress, arguing that it must apply these rules for consistency.
Mr Field said: “British steelworkers were roundly failed by the official regulators meant to protect their life savings.
“They were given precious little to guide them through murky waters filled with scammers looking to snatch their pensions – scammers who had little to fear from the FCA’s grossly inadequate action at the time.
“Now it seems they are being sold short again on what even the FCA calls “rightly” deserved compensation. The FCA has ridden to their defence and urged the FSCS to be more generous, but the FSCS is clinging to rules the FCA says needn’t apply.
“British Steel pensioners deserve more than tinkering around the edges — at the very least, they should be given the maximum possible compensation for the grievous losses they have suffered. The FSCS must think again.”
The committee has been critical of the information provided to BSPS members facing a “difficult decision”, when they were forced to choose what to do with their pension pots in a “febrile” atmosphere that Mr Field described as a honeypot for scammers, with the FCA “sleepwalking into another misselling scandal”
When the committee’s report on the episode was published, Mr Field said: “Given a choice between two defined benefit options worse than what they had been promised, with precious little support in making that choice, many steelworkers were drawn to the superficially attractive third option.”
According to Mr Field, £40 million was lost to the British Steel Pension Scheme on the bad advice of one fee-interested firm.
All “pension freedoms” are meaningless if they are not matched by tough regulatory action and a compensation scheme that puts the victims first. This is a chilling tale of our times.