It was recently revealed that advisers can discount advice costs by 75 percent when handling pension transfers from a defined benefit scheme. This may have been a factor in the British Steel Pension Scheme (BSPS) scandal. But how did unscrupulous advisers manage to cause the BSPS scandal?
When it was announced that 130,000 steelworkers would have to decide on the fate of their British Steel pension pot, it caused many to become financially vulnerable.
Unscrupulous advisers swarmed on members of BSPS, offering cut-price pension advice. Many members of the scheme opted to transfer out but had no investment knowledge. This left them requiring advice and they often became victims of the appeal of a cheap deal.
BSPS members trusted in advisers that recommended transferring into a self-invested personal pension (Sipp) scheme. However, many untrustworthy advisers suggested high-risk schemes unsuitable for their client. This is due to high-risk schemes offering higher commissions to advisers.
Trustees of BSPS have so far transferred £1.1bn, or 2,600 pensions out of the scheme. Many members of the scheme have claimed that they are worse off following pension advice. Some members have lost as much as £200,000.
The Financial Conduct Authority (FCA) is currently investigating 17 companies that took advantage of scheme members. Advisers dealing with the steelworkers will also undergo an audit. If found to have been acting unethically, they may lose their indemnity insurance and be unable to practice any longer.
Members of the scheme that transferred into a Sipp have likely been mis-sold their pension. Depending on their circumstances, they can make a complaint to the Financial Ombudsman Service (FOS), the Financial Services Compensation Scheme (FSCS) or pursue their advisers through litigation to secure compensation for their losses.
If you transferred out of your British Steel pension scheme into a SIPP unsuitable for you, get in touch today. Our team of expert financial mis-selling solicitors can offer advice and resources on a no win, no fee basis.