British Steel pension mis-selling FAQs

Steelworker pension transfer FAQ with Laura Robinson

Laura is a partner in our Financial Services Litigation team specialising in pension transfer claims and complaints, as well as claims concerning other financial and tax products and planning. She and the team currently act for over 700 steelworkers who were advised to walk away from their workplace final salary pensions and transfer into private arrangements.

Why do you think I might have been badly advised to transfer my pension?

This is a sensible question given the amount of media attention on some of the “rogue advisers” involved in the British Steel pension mis-selling scandal. But how do you know whether you were badly advised? Who do you trust? Where do you even start to find out?

Few people were well advised to transfer. We, the Government and the regulator (the Financial Conduct Authority) all agree that it is rarely good advice to give up your right to receive a guaranteed income from a final salary scheme. Ultimately, if you’re going to need to rely on a pension income in retirement, it’s very difficult to justify not choosing the final salary pension scheme (BSPS 2) which would have paid you a guaranteed income for as long as you live, which was inflation-proofed, and where none of the risk fell on you. Those benefits, and the peace of mind that comes with them, were lost when you transferred out into a private pension scheme. For some, the Pension Protection Fund (‘PPF’) was also a good option, but was largely overlooked or even demonised by some advisers.

Because final salary pension schemes are so valuable, there are special rules and guidance for advisers to comply with when advising someone whether they should transfer out of a final salary pension. For starters, advisers must assume that it is not in your best interests to transfer. No adviser should ever say that it is a “no brainer” and you should have had several meetings with the adviser lasting a number of hours to discuss your needs in retirement, your alternative options and your life objectives. If you transferred because you wanted to retire early, have “flexibility” and “control”, or in order to leave the pension pot to your loved ones, then you ought to have the advice checked. These are very unlikely to be good reasons to have transferred.

How many financial advisers advised people to transfer out of the British Steel Pension Scheme?

My team is acting for steel workers against over 90 firms, but there will no doubt be many more. Around 7,700 people transferred out into private pensions instead of opting for the new final salary scheme, BSPS 2, or staying in the old scheme and going into the Pension Protection Fund. Many people were also advised to transfer out of their Caparo 1988 pension as well. For the reasons explained above, only a small percentage of those 7,700 transfers were likely to have been suitable and in the best interests of the steelworkers.

How much did financial advisers make by recommending all these transfers?

I can’t know for certain. The fees paid to different advisers to transfer pensions vary quite widely in the cases I’ve seen. Some advisers offered flat fees of £1,000 – £1,500, but most charged a percentage of the value of the funds to be transferred. The average transfer value I have seen is around £300,000, and the average adviser charge to transfer the pension is somewhere around 2% (but can be more or less; I have seen up to 5%). Using those figures, across the (approximate) 7,700 transfers, advisers would have collected fees of £46.2million between them from steel workers’ pensions.

Those are simply the initial fees upon transferring. Once you have transferred out, your pension is then subject to a variety of other ongoing costs and charges and inflation, all of which ought to have been carefully explained to you, so that you understood how they would affect the value and potential growth of your pension.

But I wanted to transfer my British Steel pension, and I asked my adviser to arrange it, do I still have a claim?

Yes, in all likelihood. Almost all steelworkers wanted to transfer because they were very worried about what was happening. However, like your doctor, an adviser can’t simply listen to what you want and then arrange it for you. Your doctor won’t simply prescribe you medicine because you think you need it. Your financial adviser’s job is in the same – they are required to advise you about very complex financial decisions and the regulatory rules say that a financial adviser must make a suitable recommendation in the best interests of their client, and not simply accept instructions.

But I wanted to leave my pension fund to my family, I had to transfer to be able to do that?

There were many ways your family could be protected in the event of your premature death without you giving up a guaranteed, inflation-proofed pension for as long as you lived. Of course, once a pension pot is transferred out, it will be used to fund retirement, and will obviously decrease over time and could even run out if used to retire early. The families of steelworkers would only get what was left at the time of their death, which may be little or nothing.

The capital value of the death benefits under the final salary scheme was high. A steelworker’s spouse would have received 50% of the benefits on death, either as a lump sum or as a guaranteed pension for life, depending on when death occurred.

Steelworkers did not need to lose their valuable final salary benefits to leave sums to their families. We understand that anyone still at the steelworks has life cover of between four and six times their salary if they die before they retire. In addition, most are now contributing to the new company scheme (or another pension scheme having left the steelworks) which could also be left to loved ones. Many own their own homes and have savings to leave to family. Finally, they could have bought life assurance for a small monthly payment if further provision for their families was needed or wanted.

But my pension pot is large and has gone up since I transferred? I don’t think I’ve lost anything?

You almost certainly have. Losses won’t be apparent now but will be felt when you come to retire. This is because it is very unlikely that your pension pot will be enough to secure the same level of benefits that you would have enjoyed, had you not transferred.

It’s a complicated calculation but, in a nutshell, your loss is the amount of money you will need when you retire, in addition to your transferred-out pension pot, to buy the same benefits that you would have had if you didn’t transfer out.

Many steelworkers we’ve helped so far have received tens of thousands of pounds in compensation; we’ve recovered £4.4m for our steelworker clients in total. That compensation would not be being paid if losses had not been incurred.

How do I get in touch about making a claim?

If you would like to speak to us about your pension transfer, without any obligation, you can call our free phone number 0800 422 0221. Or, get in touch by email: pt@clarkewillmott.com.

If you would like to speak to Laura Robinson directly, please call 0345 209 1074. We have offices across the country and, if you would prefer it, we can arrange group meetings at venues close to the steelworks.

Will I be charged for making a mis-sold pension claim?

You will not be charged for an initial meeting or call. Further, we know from the steelworkers that we already act for that, having already been let down, no one wants to risk being any worse off. So if you want us to help you with your complaint, we can act for you under a ‘no win, no fee’ agreement. This means that if you don’t receive compensation, you don’t pay us anything.

We will explain further if you get in touch, but it’s important that you know that it is not a requirement that you have legal representation, or appoint a claims management company, to make a complaint and claim compensation through the Financial Ombudsman Service or to apply to the Financial Services Compensation Scheme.