British Steel Pension Scheme Mis-selling To Cost £0.3bn
Published / Last Updated on 17/08/2021
As featured in a story carried by FTAdviser.com, pension lawyers have ‘guestimated’ that the financial services industry may have to foot a £300m bill to cover re-dress compensation payments to thousands of British Steel Pension Scheme (BSPS) members.
What is the BSPS Scandal?
As part of a deal brokered by the British Government for Tata to buy/save British Steel, they were allowed to wind up the existing British Steel Pension Scheme Number 1 given its liabilities with members offered the choice o their pension scheme being transferred:
- Pension Protection Fund (PPF), the compensation scheme for bankrupt company pension schemes with 90% protected.
- A new British Steel Pension Scheme No 2 (BSPS 2) supposedly identical to the original one but without the debts.
- Your own private, none guaranteed pension scheme.
For most people, the better choice would be to have kept guaranteed pension rights by either transferring to the PPF or to BSPS 2 with only a few, with valid, overriding reasons to give up the guarantees and have their own private pension. A small number of rogue financial advisers promptly ‘decamped’ to South Wales and Yorkshire and mis-sold over 8,000 steel workers.
Comment
Nearly £3bn of pension scheme funds were transferred out making those rogue advisers £millions in fees. Six of the nine firms involved have now become insolvent and it is the adviser community that will end up paying the bill via the Financial Services Compensation Scheme and Professional Indemnity Insurance premium increases. Legal advisers suggest this could cost the industry £300m (10%) of transferred funds.
Yet another reason why we have stopped offering advice for defined benefit scheme transfers as the costs of insurance and therefore the fees that we would need to charge are simply too high.