It is four years since the British Steelworkers were given their time to choose between seeing their pension paid by the PPF or by a newly constituted pension scheme now called New BSPS. But this decision was overshadowed by a more fundamental decision about whether to take a cash equivalent transfer value into a personal pension and break the link with scheme pensions altogether.
For reasons this blog has gone into in some detail, around 7,700 members, many of whom received independent financial advice to inform their decision, chose to take the transfer option, with around £2.8bn pulled from the scheme and placed into riskier, stock market-based pension arrangements, some with high charges.
Now the National Audit has announced its intention to investigate the FCA’s role in regulating these goings on.
Following the restructure of the British Steel Pension Scheme (BSPS) in 2017, members were given several alternative pensions options including transferring their funds out of the pension scheme altogether. Around 7,700 members, many of whom received independent financial advice to inform their decision, chose to take this option, representing about £2.8 billion of funds.
The Financial Conduct Authority (FCA), which regulates independent financial advisors, has identified that many steelworkers received unsuitable advice, and may have made poor financial choices and lost significant sums of money as a result. It has encouraged them to revisit the advice they received and complain if they have concerns.
This investigation will set out the activities the FCA has undertaken to regulate financial advice in the BSPS case, its plans for supporting steelworkers who may be entitled to redress, and the extent to which compensation is being delivered.
The investigation is scheduled for April 2022 which gives the FCA as much time to prepare as the steelworkers had.
It was good to see Al Rush and Richy Pugh on the BBC news and its website welcoming the NAO’s decision. By the NAO’s finding , pensions in the UK will be judged and this investigation will make national news. Also featured in the article was local MP Nick Smith who has been prominent in calling for compensation for those ill-advised.
This is from his statement on the announcement.
Just 1200 out of nearly 8000 steelworkers likely to be affected have put in complaints so far. Furthermore, 85-90% of their complaints have been upheld, so a big pool of steelworkers with likely good cause are being left behind.
— Nick Smith (@BlaenauGwentMP) October 20, 2021
And he is right to call for change
With the NAO getting involved and looking for what lessons can be learned, I hope the FCA and other financial regulators will be encouraged to up their game and better support steelworkers.
— Nick Smith (@BlaenauGwentMP) October 20, 2021
Time to change
While the Steelworkers had their time to choose, the FCA now has a time to change.
Progress has been slow that this guidance only appeared this June . But at last action is speeding up
British Steel Pension Scheme: what to do if you transferred out https://t.co/Z5JnjBVDrf
— Henry Tapper (@henryhtapper) October 20, 2021
Four years of deliberation need to be replaced by 6 months of positive action.
They need to start by looking at how they compensate those who have been badly advised. In my view compensation should be linked to restitution. The FCA needs to negotiate with the private sector a way to mirror the benefits of the choices available (PPF and BSPS) and offer compensation to top up the CETV to the level needed to repair the damage done. If the CETV has been drawn down, compensation must take the drawdown into account. As my recent blogs have been saying, this is the way that the Securities and Investment Board envisaged things.
The FCA has to work on this with the Pensions Regulator (who are far from out of the woods on this either). The NAO should look carefully at why TPR sanctioned the Regulatory Apportionment Agreement entered into by Tata and BSPS and did not let BSPS make its way into the PPF without what now looks the peril of the Time to Choose.
If no one else was shouting “fire!”, then I was, throughout the summer of 2017. Here is a clip from the steelworkers Facebook page that I stumbled on in October four years ago 
I shared this not just on my blog in October 2017 but with the Trustees and their advisers pressing them for a transfer helpline. Instead the trustees took the view that the steel men would not transfer because they never had.
The FCA and tPR were nowhere to be seen in Port Talbot or Scunthorpe during the time to choose and this was when the damage was done.
I gave evidence along with the FCA’s Megan Butler at the Work and Pension Select Committee’s investigation into the Time to Choose in early 2018. It was clear then that the FCA had no grasp of what was happening in steel towns.
Steelworkers were told “no advice- no transfer” and struggled to find advisers who had capacity to help them. But searches for advisers in Port Talbot on the Government’s own IFA finding service (now on MaPS) led steelworkers to Active Wealth Management – probably the most notorious IFAs active in the “chicken dinner” market where steelworkers were offered a free meal in return for an introduction to Darren Reynolds and his Active Wealth team.
There was simply too little protection for steelworkers in Port Talbot and in Scunthorpe, steelworkers were able to meet IFAs for peremptory financial advice in union offices.
And too little has changed
Despite the criticisms from Frank Field and the Work and Pensions Select Committee in 2018, the FCA has been inconspicuous in steel towns.
The Rookes report came and resulted in an “action plan” from tPR/FCA and the SFGB (now MaPS)
These are the documents that the FCA need to revisit in the light of the complaints from the steelworkers that they were not protected and are not being compensated in a reasonable way. Whether they will stand the scrutiny of NAO depends on what happens now.
There are offers to help the steel men with restitution and I hope that the FCA will listen to those making them.
It is not too late for the FCA to change, but if it does not show some urgency between now and April, it has a stiffer foe to face than it’s faced to date.
