Steel workers suffer from ‘just plain crooked’ pensions advice, MPs warn

Steel workers
Thousands of British Steel workers are at risk of losing out as 'shoddy' financial advice could harm their pension savings, MPs have warned Credit: BEN BIRCHALL/AFP/Getty Images

British Steel workers are suffering from bad financial advice which can encourage them to quit their valuable final salary pension schemes in favour of worse arrangements, MPs have warned.

Advice is too often “shoddy or just plain crooked”, Frank Field, chairman of the influential Commons work and pensions select committee, said in a letter to the Financial Conduct Authority’s (FCA) top supervisor Megan Butler.

He added that the FCA had been “extraordinarily cautious” by acting very slowly to protect savers. So far the FCA’s action to help British Steel Pension Scheme members “remains grossly inadequate”, Mr Field warned.

“It is apparent that insufficient protections are in place to prevent consumers with defined benefit pension pots being ­seduced into a transfer against their ­interests,” he said.

The FCA acknowledges that final salary scheme members will rarely benefit from transferring out of their pension, but professional services firm Mercer estimates 210,000 people did just that with £50bn of savings between April 2015 and June 2017.

Frank Field MP 
Frank Field MP said the FCA should find ways to protect defined benefit pensioners from being ripped off through bad advice Credit: PA

The letter comes after warnings that rogue advisers are specifically targeting the more than 100,000 members of the British Steel pension scheme.

Those who do switch out give up an inflation-proofed income for life, instead bearing the risk of falling returns outside the scheme, and facing substantial fees to transfer.

From April to September more than 7,000 savers requested a transfer out of the defined benefit scheme.

The FCA’s own studies indicate that less than half of the advice given by financial advisers on transferring from defined benefit pension schemes is suitable.

By contrast in the wider pensions advice market around 90pc of advice is deemed to be suitable.

Savers should be given easier access to information on which financial advisers are legitimate and which have been suspended by the FCA, the letter said, while the MPs also as if the regulator has “considered the possibility of suspending all defined benefit transfer advice while reparative action is taken”.

An FCA spokesman said: “The FCA has received the letter and will, of course, respond to it.”

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