FCA supports steelworkers amid pension overhaul
The UK’s financial regulator is to write to steelworkers who lost money transferring their pensions, amid a wider overhaul of the rules on charges.
Many members of the British Steel Pension Scheme lost significant sums of money over the advice they were given to transfer to a different scheme.
The Financial Conduct Authority (FCA) will ban charges paid when a transfer from certain plans takes place.
It will contact 7,700 steelworkers outlining how to make a complaint.
Which charges will be banned?
The FCA said there were too many cases where people had been advised to transfer out of defined benefit, or final salary, pensions (guaranteed by employers) into defined contribution pensions (which depend on performance of investments) against their best interests.
The suggestion is that financial advisers had an interest in them doing so, as they could levy a charge only when the transfer went through.
Now the regulator has confirmed it will ban this so-called contingent charging in October.
The debate over pension transfers hit the headlines following the case of the British Steel pensioners who were pushed to transfer out of secure pensions in what was condemned as a feeding frenzy by advisers who levied high charges when transfers went ahead.
A Commons committee called such cold-calling firms “vultures” and “parasites” in its report into the scandal.
The FCA found that in 192 instances it reviewed, 21% appeared to be suitable, 47% appeared to be unsuitable, and 32% appeared to contain “information gaps”.
The regulator will write directly to all 7,700 former members of the British Steel scheme who transferred out to “help them revisit the advice they received, and to complain if they have concerns”.
Separately, it is conducting 30 enforcement investigations of pension advisers.
The FCA’s action has been criticised by some pension advisers, who say that genuine assistance will be lost as a result of the regulator’s attempt to tackle rogues in the sector.
Andy Bell, founder of AJ Bell, said: “Banning contingent charging swaps one set of problems for another and doesn’t get to the heart of the issue. Most importantly, defined benefit transfers will now become an option only available to the wealthy.
“Covid-19 will see the failure of businesses, which in turn will weaken or bring down final salary pension schemes. Members of defined benefit schemes, no matter how wealthy, should be allowed to access their right to transfer.”