An influential group of UK politicians has hit out at the country’s financial regulators for failing to protect members of the British Steel Pension Scheme (BSPS) from inappropriate advice.
In a report published today, the Work and Pensions Select Committee – made up of politicians from the UK’s lower house of parliament – accused the Pensions Regulator (TPR) of “fiddling while Rome burns” and failing to support steelworkers in understanding their options.
Some BSPS members were “shamelessly bamboozled” into transferring their guaranteed defined benefit (DB) pensions into private arrangements with high charges and unsuitable investments, the committee said.
The report relates to a major restructuring of the scheme to prevent its sponsor, Tata Steel UK, from being driven to insolvency. The restructure is awaiting regulatory approval.
Members were given the option of transferring to a new scheme, sponsored by Tata Steel UK but with lower indexation, or going into the Pension Protection Fund, which cuts benefits by 10% for those not yet retired.
Roughly 2,600 of the scheme’s 122,000 members requested a transfer from the defined benefit (DB) BSPS to private arrangements. However, politicians and pension advisers last year flagged serious concerns about the suitability of the recommendations given to these individuals. Several advice firms have been barred from pension transfer business following regulatory intervention.
Committee chairman Frank Field said he failed to see evidence of the Financial Conduct Authority (FCA) “working better for the people it is meant to protect: individuals making life-changing financial decisions”.
He added: “This is the first deal like this, but there will be more. All the responsible authorities must act, now, to stop more people being cheated. We will be asking all those involved to report back to us on the changes they will make, promptly, to stop this happening again.”
The report recommended that TPR conduct a full review of its role in the BSPS restructure, “listening to members and learning the lessons of how they were let down”.
A spokesperson for TPR highlighted its role in securing a £550m (€619m) settlement for BSPS as part of the restructure. The new scheme was “the best possible outcome for everyone involved in what was a very challenging situation, bringing greater certainty for thousands of scheme members,” the spokesperson said.
The regulator also emphasised that it had engaged with BSPS trustees, the FCA and the UK’s Pensions Advisory Service to address concerns about poor advice.
“We note the committee’s recommendations and are continuing to work more closely with the FCA to protect pension savers,” the spokesperson added. The FCA and TPR last week announced a new joint approach to pensions regulation.
The FCA said it would review its register of financial advisers to make it easier to use, on the back of complaints from individuals and a recommendation from the committee. The regulator added that it was also reviewing its rules on pension transfers.