Towards the end of last year, a great scandal came to light surrounding British Steel Pensions. Now, the FCA has issued a warning around final salary pension schemes.
Final salary pension schemes
The issue began when Tata Steel, owner of the scheme, announced merger plans, triggering a split for the scheme.
As a result, steelworkers were given a choice as to what to do with their pensions and had three options:
- Remain in the current scheme, which was transferred to the Pension Protection Fund (PPF) in March 2018
- Move to the new British Steel Pension Scheme, BSPS2
- Transfer to a private pension
The PPF and BSPS2 options had less generous benefits than the original scheme. However, the real problems came for the group who decided to transfer to a private pension.
Local financial advisers could not cope with the demand and stopped taking new business. This led to an influx of unscrupulous and unregulated advisers coming in to target steelworkers.
This resulted in many inexperienced investors being advised to transfer into self-invested personal pensions (Sipps), which may not have been the best option for them.
In addition, they were charged high fees to facilitate the transfer. They were also not made aware of the level of risk associated with the investments.
What has the industry done to prevent this from happening again?
In a bid to stop unscrupulous advisers from targeting unsophisticated investors, the Personal Finance Society (PFS) has launched a taskforce to boost pension advice standards. This is a direct response to the British Steel Pension Scheme ‘fiasco’. It will create an industry-wide benchmark for professional standards in pensions advice to help advisers follow best practice.
Is this enough?
It’s definitely welcome news but customers should still be wary. Recently, the FCA issued a warning to members in eight major pension schemes, including Lloyds Bank and J Sainsburys, as they believe they could be targeted by unscrupulous advisers.
If you were advised on a SIPP that was unsuitable due to the level of risk or investment size, it may have been mis-sold. Get in touch with our expert team today and we can advise you on the steps to take in your complaint.