Industry experts are worried many British Steel Pension Scheme (BSPS) members will end up in the Pension Protection Fund (PPF) instead of switching to the new fund.
They voiced these concerns during a special evidence hearing today held by the Work and Pensions Committee (WPC) in order to probe questionable approaches and unsuitable advice given to BSPS members.
The hearing was conducted as part of its ongoing pension freedoms inquiry and was prompted by anecdotal evidence that BSPS members are being targeted by scammers.
BSPS trustee chairman Alan Johnson said: "From a trustee point of view, all of the work around these issues has to be completed before the end of March next year, and unfortunately, the default option is that members stay in the BSPS scheme and automatically have their pension put in the PPF on 29 March."
He added members need to go to the new scheme and it has been difficult to encourage people to do that.
British steelworkers have until 22 December to decide whether to transfer into the PPF, join the new British Steel scheme which offers lower futures increases than the old scheme but the same or higher increases than the PPF, or take a lump sum payment.
The BSPS recently extended its decision-making deadline after the Department for Work and Pensions confirmed plans to allow the PPF to mirror scheme rules for bridging pensions.
Community trade union operations director Alastair McDiarmid said: "As of this week, 30,000 pensioners have to return their forms or end up somewhere they shouldn't be - the PPF - which is not in their interest. We should suspend the consultation, and engage with trade unions to find a way to resolve issues."
Advice firms Pembrokeshire Mortgage and Mansion Park have been named alongside Active Wealth as firms that have had their pension transfer permissions suspended in the wake of the BSPS closure, Financial Conduct Authority director of supervision Megan Butler confirmed at the hearing today.
First Actuarial director Henry Tapper said he has seen many instances of poor advice and errors since allegations came to light.
He added people were wanting to transfer out of the scheme without thinking about making a rational decision, and advisers were not pushing back and asking people to consider the long-term implications of their decisions.
"There was an in-built bias with the advice given, and that was to transfer, and transfer into a product for which the adviser could get paid more."
"I've spoken to officers of schemes and I think the suspicion is that hundreds of members had taken bad advice. The money is going first of all to self-invested personal pensions, and then transferred into funds - which are typically quite complex in structure and there's a lot of confusion about what they're invested in and what they're paying."
He added it is not as simple as saying trustees have to get their records in shape, but that it is very complicated so there must be some sympathy for trustees.
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