Thanks to the moderators of the BSPS Facebook groups for access and to the poll’s author for permission to publish. This is a very worrying post from a BSPS member.
The poll is recent and is the only data I have seen relating to BSPS member intentions.
It tells a tale… if members act in line with this (exit) poll, something like £3bn would leave BSPS before BSPS2 arrived. As the bulk of BSPS’ assets refer to retirees and are destined for the PPF, this could leave BSPS2 looking a little unpopulated.
It could also leave the regulators with a difficult problem if the transfers are not subject to good advice.
Thoughts?
I’ve been asked for some thoughts. I have three.
- Firstly, even denuded of 85% of potential members, BSPS2 would remain viable and – assuming the residual sponsorship was not reduced, the solvency of the scheme should improve.
- Secondly, the run on BSPS1 is unlikely to mean further reduced transfer values. This is not a transfer now while stocks last situation and there is no need to panic.
- Thirdly, though I can feel confident about BSPS2, I cannot say the same for all the 86% of those who will transfer out. Will 83% of those who expect to be advised, have ongoing advice, that remains to be seen, will the 4% who will make their own way end up happy, well we have some evidence that they may not,
So, on balance, I have to urge extreme caution to BSPS members who are not in retirement.
Even though time seems to be conspiring against these members, there is considerable downside in taking a transfer without being sure what happens next. It is unlikely that you will fall into a bearpit, but scammers are digging them. It is more likely that you underestimate your life expectancy and the needs of your spouses. It is more likely that your investment pot will fall prey to “pounds cost ravaging” or “sequential risk” (ask your adviser). It is likely that the investment hurdle rate you need to hit, to justify drawing a pension from your own pot will be higher than you think, after you have paid all fees.
That transfer value did not happen by accident. To put money behind the defined benefit promise, the BSPS Trustees and the scheme’s management have done well. We know that the management costs of the scheme are some of the lowest amongst all occupational pension schemes. If cost control is a proxy for a well-governed scheme, you can feel confident that transferring to BSPS 2 will keep you under this excellent umbrella.
It is an umbrella that will shelter many and an umbrella that is not available if you choose to transfer out. Though there is certainty in your transfer – there is no certainty that it will provide you with equivalent outcomes. The British Steel Pension Scheme has let nobody down.
Think before you press the trigger. If you are not a BSPS pensioner, you are likely to have a minimum of twenty years of life ahead of you. That is a long time for your money to last and a long relationship with your financial advisor.
But in terms of the timeframes of an occupational scheme like BSPS (or BSPS2) it is no time at all.