British Steel workers ‘let down’ over pension advice

From tomorrow (31 March) the Financial Conduct Authority (FCA) will publish a consultation on providing compensation to workers who transferred out of the British Steel Pension Scheme.

The incident has been considered as a “real low point” for the industry, as thousands of steel workers will lose out financially after being advised to transfer out of their scheme.

Commenting on this, Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, said: “Steelworkers were rushed into making complex decisions with insufficient information and now face an uncertain future.

“They have been severely let down and the redress scheme must provide sufficient compensation to put those disadvantaged as close to back in the same position as they were, as possible.”

The advice that was given to said workers has since been found to be sub-standard in many cases.

Now, members can claim compensation from their adviser or through the Financial Services Compensation Scheme (FSCS).

Morrissey noted that many businesses saw “pound signs way ahead of client outcomes” during the situation.

“The sheer number of people transferring out sent warning signals across the industry but too late to prevent huge financial harm to many people,” she added.

Since the incident, many advisory firms have become insolvent in the wake of the crisis and FSCS compensation is limited to £85,000. However, many members have experienced a loss in excess of this.

The pensions expert added that as yet, a relatively small proportion of those affected have sought compensation.

“It is nigh on impossible to replicate the guaranteed benefits received from such a scheme in the modern flexible pensions that are more common today, hence the FCA consultation on how a redress scheme should work,” Morrissey continued.

“Recent pension reforms make it complicated to work out the true scale of losses but the aim should be to try and put those worse off back in a position they would have been in if they had not transferred out.

“We have seen many of the firms involved in this scandal declared insolvent and while the FCA has warned firms against disposing of assets in a bid to avoid liability we may see more adviser firms collapse in the coming months.”

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