A staggering 88% of complaints about bad pension transfer advice, lodged so far with FOS – by British Steel Pension Scheme members – have been upheld. This compares with an uphold rate of 38% for the wider pool of DB pension transfer complaints lodged with FOS. https://t.co/kx6FxNGaxB
— Josephine Cumbo (@JosephineCumbo) August 18, 2021
The Stats are extraordinary, reflecting the peculiar circumstances that surrounded the months leading up to “time to choose” and “time to choose” itself. To remind ourselves, the choice was meant to be between staying in electing to join a news British Steel Pension Scheme or having a differently shaped pension paid from the PPF. In practice, it became a three way contest, the third way being to transfer to a personal pension arranged by a financial advisor.
The chair of trustees of BSPS told me that the Regulatory Apportionment Arrangement worked fine, other than for the 7,700 steelworkers who opted to take a transfer, many into policies that are extremely unlikely to provide the level of benefit from either the PPF or the new BSPS.
The FT report that
To date the Financial Ombudsman Service (FOS) has received 438 BSPS complaints and has settled 43 with nearly nine in 10, or 88 per cent, of cases awarded in the customers’ favour. This compares with an uphold rate of 34 per cent for all DB pension complaints in the last financial year.
News that these complaints are being upheld at such a rate will not be surprising to Jo Cumbo (or indeed me, Al Rush or the many others who had one on ones with steelworkers in 2017.
My then firm – First Actuarial – presented to the BSPS and its Trustees a service designed to help steelworkers understand what the transfer option was. Our proposal was rejected. I was later told that the Trustees had been advised by the actuaries that there was no historical evidence of steelworkers taking Cash Equivalent Transfer Values.
This brings me to the point of this blog. It is simply not good enough for the Trustees and their advisers to consider this a problem confined to a few IFAs who used chicken dinners to win over financially illiterate steelworkers.
The fact was that those steelworkers had considered the offer made as a CETV and many told us that transferring was a “no-brainer”. This was because no proper case for staying in a form of BSPS – or even the PPF, was made – relative to the CETV.
The failure was a failure not just of regulated advice but of non-regulated guidance.
This does not exonerate regulated advisers or the unregulated lead generators who fed them leads. But it is still part of the picture. I don’t think that the Rooke report properly gets to the bottom of this issue.
A headline from 2017, born out by the FOS today
Good to see that many steelworkers who received unsuitable advice are being or have been compensated.
On the other hand, many of my work colleagues at Tata Steel’s largest UK plant in Port Talbot are happy with their decision to transfer out of the British Steel Pension Scheme (BSPS). I was recently speaking with one of them who said that his £500,000 CETV is doing quite well and he’s been contacted by the IFA firm he went with offering £54,000 (in light of the BSPS transfer scandal) which he gladly accepted.
I opted for BSPS2 even though I had (and still have) the option to transfer out, but when you hear things like this it makes you think twice. Can BSPS2 really provide better benefits than this I wonder?
Unless you have serious health issues etc, anyone who now wants to transfer out of BSPS2 will find it very difficult as most IFA firms won’t touch BSPS2 transfers with a barge pole after all the bad publicity.
At the time of the BSPS ‘Time To Choose’ exercise in 2017, almost everyone I spoke to about their decision on whether or not to transfer out of the British Steel Pension Scheme was highly influenced by the very generous CETV’s they received and the ability to pass this on to their beneficiaries upon their death. Second to this was a lack of confidence in TATA Steel UK who would sponsor the British Steel Pension Scheme.
I found the ‘Time To Choose’ options pack (sent to BSPS members in October 2017) very informative and it clearly explained all the details and options I had (including member examples) of moving into BSPS2, the PPF and transferring out. I felt like I was given enough time and information to make a good decision.
Also, the BSPS Trustee provided members with the ‘Time To Choose’ newsletters. Issue 1 being in August 2017 – this outlined our options, and issue 2 in November 2017 – this gave relevant information for pensioners and non-pensioners.
In the ‘Time To Choose’ booklet the BSPS Trustees said…..“You should think carefully before transferring out. You would be giving up guaranteed future pension income in return for income that might not be guaranteed and could vary depending on how you manage it. Even though transfer values can seem very large, transferring out is unlikely to give you as much total pension income as either the PPF or the new scheme, on a like-for-like basis.”
Furthermore, in the June 2017 edition of TATA Steel’s ‘Delivering Our Future’ newspaper there was a Joint Statement from the National Trade Union Steel Co-ordinating Committee which said…..“While everyone’s circumstances are different, our pension experts tell us that scheme member’s benefits in retirement are likely to be better protected in BSPS2 or the PPF, rather than through transferring out.”
At the time, the Financial Conduct Authority (FCA) said……”In most cases you are likely to be worse off if you transfer out of a defined benefit scheme, even if your employer gives you an incentive to leave. The cash value may be less than the value of the defined benefit payments to you and your eventual pension payments will depend on the performance of the new scheme, with the risk that the scheme does not deliver the returns that you expect.”
After all these warnings (which were before the ‘Time To Choose’ period ended) the vast majority of BSPS deferred members chose to transfer out.