“Parasitic” financial advisors have “shamelessly bamboozled” British Steel pension scheme members, according to MPs who have warned of “another major mis-selling scandal” conducted under the noses of hapless regulators.
Unite welcomed the report and called for authorities to “toughen up” on vulture financial advisors and for the government to strengthen pensions legislation.
Last summer, Tata Steel restructured the £15bn scheme in an attempt to provide more certainty for its 130,000 members.
The restructure came after Tata announced the sell off of its UK operations due to a hostile market environment.
Tata’s British staff made the difficult decision to vote in favour closing the pension scheme to new contributions, in order to help safeguard the future of the firm’s 8,500 employees.
Members were given the choice of moving their contributions to the Pension Protection Fund or a new scheme – both of which offered reduced but guaranteed payouts.
Those who had not reached pension age were given a third option of entering a defined contribution scheme, entailing greater risks.
The work and pensions committee report stated that “faced with making a life-changing choice in a hurry” many members chose the risker third option – resulting in thousands being left out of pocket.
The committee savaged both the Pensions Regulator and Financial Conduct Authority (FCA) for failing to make sure “members were not left in the dark”.
The report said the restructuring meant “perfect conditions for vultures to take advantage” were created.
The report stated, “Many BSPS members were shamelessly bamboozled by advisers into signing up to ongoing adviser fees and unsuitable funds, characterised by high investment risk, high management charges and punitive exit fees.
“Another major mis-selling scandal is already erupting and we therefore call on the relevant bodies to treat this as such and take urgent action.”
During the last 11 months, 2,600 pensions have been transferred from the scheme with a total value of £1.1bn.
Work and pensions committee chair and Labour MP Frank Field said, “Once again we find the Pensions Regulator fiddling while Rome burns, when it should have seen this rip-off coming.
“All the responsible authorities must act, now, to stop more people being cheated.”
The committee recommended the Pensions Regulator undergo an internal safeguarding review to the learn from the scandal and called on the FCA to create an online register to help weed out rogue financial advisors.
Unite national officer for steel, Tony Brady, reiterated that members need to be aware of the dangers and urged those considering moving money to wait for all the information to be available “before making an informed choice about the future of their pensions”.
In a joint statement, the steelworkers unions, including Unite, welcomed the committee’s call to stop ‘unregulated and parasitical’ advisors exploiting people and demanded that the government, Tata and the Pensions Regulator take their share of responsibility for the scandal.
The unions said, “There is clear evidence from this report that some steelworkers were exploited and given poor advice on hugely important choices. Regulators need to toughen up when it comes to shutting down irresponsible financial advisers, and warning people about which firms to avoid.
“The unions repeatedly called for government to take action to allow ‘deemed consent’ – which would have allowed thousands of people to get the better outcome for their situation. While it is sadly too late in this instance, we welcome the committee’s recommendation that government should introduce legislation to allow for ‘deemed consent’ in future similar cases.”
The unions added, “We will continue to support our members who believe they have been ripped off and will keep lobbying government and regulators to ensure measures are put in place so that such a scandal can never again be allowed to happen.”