Following the British Steel Pension Scheme scandal, the risks of pension transfers have been highlighted to the British workforce. We discuss these risks and how these impacted the British Steel Pension Scheme members.
British Steel Pension Scheme
The £15 billion pension scheme was released by Tata Steel during a merger deal. This left its 130,000 members with a huge decision to make. They could:
- Remain in their current scheme. This was transferred to the Pension Protection Fund in March 2018.
- Move to the new British Steel Pension Scheme, BSPS2
- Transfer to a private pension of their choosing
Some members of the scheme had a pension pot of up to half a million pounds. However, many did not have the financial knowhow to invest their pension pot elsewhere. This left workers with limited options, one of which being to trust in financial advisors.
MPs described financial advisors as “vultures” preying on the workers. Knowing the size of pension pots, several investment firms offered their services to members of the scheme. This has led to complaints of financial mis-selling from members to the Financial Conduct Authority (FCA) as they were unaware of the risks of pension transfers, and some have lost up to £200,000 after being ill advised.
Risks of pension transfers
Choosing to remain in their current scheme or moving to BSPS2 saw members worse off than their original pension pot. However, transferring to a private pension of their choosing starkly highlighted the risks of pension transfers.
Many advisors offered self-invested personal pension schemes (SIPPs) to British Steel Pension Scheme members. However, the members were unaware of the level of risk or the fees involved when investing in the schemes, in some cases it was presented as a guaranteed high return.
Often, rather than high returns, workers have lost substantial sums of money as their pension pots were invested in risky investments such as storage pods, overseas property and forestry, which declined in value. This has led to many firms being investigated by the Financial Conduct Authority (FCA) as claims about mis-selling have been made by scheme members.
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.