Steelworkers left to fend for themselves 'while Rome burns', Field's committee says
Ensuring British Steel workers were well-equipped to make a decision on their future pension provision was "afforded insufficient priority", and the regulator now needs to review the process, the Work and Pensions Committee (WPC) has said.
Publishing its conclusions of the inquiry into advice given to steelworkers, the parliamentary committee criticised The Pensions Regulator (TPR), the Pension Protection Fund (PPF), and the government for failing to monitor the situation and inform steelworkers of their upcoming choice properly.
Around 124,000 former or current British steelworkers were asked to choose between moving into a new British Steel pension scheme or the PPF, when the regulator approved a regulated apportionment arrangement (RAA) for the scheme last August.
This led to 25,000 members, one fifth of all members, not actively responding to the ‘Time to Choose' exercise, the WPC said, while around 2,600 transfers had been processed since March last year, some of which were unsuitable. The Pensions Ombudsman is now reviewing around 150 complaints relating to transfer values given in the process.
Consequently, TPR needs to "conduct a review of the information and support provided to British Steel Pension Scheme (BSPS) members", including feedback from scheme members, the committee said. This review should be published and form the basis of an "action plan to counter risks in any similar cases in future".
The report said current and former steelworkers had been "woefully under-supported in making their choices", despite a dedicated hotline run by The Pensions Advisory Service (TPAS) and the scheme's chairman Alan Johnson telling the committee that members had received sufficient information in the run-up to D-day.
"It was the responsibility of TPR, who oversees trustees and signed off the RAA, to monitor the situation and ensure that members were not left in the dark," the report continued. "Along with the PPF and the government, they afforded insufficient priority to ensuring the steelworkers were adequately informed. While the setting up of a dedicated TPAS helpline was welcome, it came too late."
It also condemned "dubious advisers" and "parasitical introducers", invariably dubbed "vultures", who "shamelessly bamboozled those members into signing up to ongoing adviser fees and unsuitable funds, characterised by high investment risk, high management charges, and punitive exit fees".
In a statement, WPC chairman Frank Field criticised TPR for perceived inaction or late response.
"Once again we find TPR fiddling while Rome burns, when it should have seen this rip-off coming," he said. "Given a choice between two defined benefit (DB) options worse than what they had been promised, with precious little support in making that choice, many steelworkers were drawn to the superficially attractive third option [transfers].
"This is the first deal like this, but there will be more. All the responsible authorities must act, now, to stop more people being cheated. We will be asking all those involved to report back to us on the changes they will make, promptly, to stop this happening again."
A TPR spokesperson said the watchdog had met its obligations but would consider the committee's recommendations.
"We fulfilled our primary role by evaluating and approving this complex restructuring of the BSPS including obtaining £550m for the scheme," they said. "As part of this rare restructuring, which prevented the company becoming insolvent, a new pension scheme was offered to members as an alternative to entry to the PPF. We believe this was the best possible outcome for everyone involved in what was a very challenging situation, bringing greater certainty for thousands of scheme members.
"We note the committee's recommendations and are continuing to work more closely with the Financial Conduct Authority (FCA) to protect pension savers."
In a statement, the BSPS trustee said it "notes the report" and "welcomes the work being done to ensure that members taking transfers... do so on the basis of suitable advice".
It added: "The committee has nevertheless suggested that the member communication plan for the Time to Choose exercise proved 'woefully inadequate'. This is not supported by the evidence."
It pointed out it received 97,000 responses to the exercise, an 80% response rate, after a communications strategy across multiple media, as well as 41 members events across the country, with each member sent "user-friendly personal information packs".
"Although the timescale was undoubtedly challenging, the trustee is pleased that so many members took the time to choose the outcome that was best for them based on their personal circumstances."
Recommendations
The committee recommended that a system of "deemed consent" - where members are automatically moved into a new scheme if it is "unequivocally" the best option for them - is included in the government's upcoming DB white paper, arguing "that system would have resulted in better outcomes for pensioners and freed administrative resources to support members for whom the decision was less clear-cut".
It also called on the FCA to ban charging on DB transfer advice, as well as name and shame firms or individuals suspended from providing transfer advice, and abandon plans to remove the requirement for advisers to start from the position that transferring out is not in the interests of most DB scheme members.
Responding to the report, Royal London director of policy and former pensions minister Sir Steve Webb said members were not given enough time or information to make the choice, but said the response should not be to cut off the pension freedoms.
"The BSPS and the employer failed to make sure that all workers had access to high-quality impartial advice about their pensions and failed to make sure they had enough time to make calm, well-informed choices about whether or not to transfer," he said. "The right lesson is to clamp down on those who seek to exploit people and scam them out of their pension savings, not to deny workers the chance to reshape their retirement plans if they wish to do so on the basis of impartial expert advice."
Hargreaves Lansdown head of policy Tom McPhail said the scheme trustees and administrators should have borne more responsibility for members, arguing "it shouldn't have come as a surprise that many members were interested in transferring out".
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