Over 100,000 workers let down as they fall prey to steel pensions scheme mis-selling scandal
British Steel pension scheme members were targeted by “vulture” financial advisers after Tata was allowed to offload its retirement fund, MPs say.
In 2017 the Indian firm announced a restructuring of the £14bn fund to keep its UK loss-making operations afloat.
But the government, Tata and regulators failed to protect 124,000 members from a “major mis-selling scandal”, the Work and Pensions Select Committee said.
The UK government has yet to issue its response to the “neglect” claim. The Pensions Regulator said it would continue to work to protect savers.
The report from the Work and Pensions Select Committee was looking at the closure of the British Steel Pension Scheme (BSPS).
Regulators had accepted that Tata Steel UK would be insolvent if it continued to sponsor the scheme.
About 8,000 people are employed by Tata across England and Wales, including 3,500 in Port Talbot, but those figures were dwarfed by number of retired steelworkers – more than 100,000 – who were members of the scheme.
Those members had to decide what to do with their pension funds after the scheme was separated from Tata last September.
Between October and December 2017, they had a choice of entering into a new Tata-backed scheme, BSPS2, or the Pension Protection Fund (PPF).
Both were less generous than the scheme that closed but BSPS2 was better for the majority of people than the PPF.
A third option was transferring out of the scheme completely – a so-called DB transfer – but the committee said this is “not usually in someone’s interests”.
But circumstances surrounding the BSPS “created perfect conditions for vultures to take advantage”, the MPs concluded.
One Tata worker told the BBC he lost almost £200,000 by transferring out of the BSPS after seeking independent financial advice.
Last week, the scheme’s trustees said that, since March 2017, it has processed 2,600 pension DB transfers with a total value of £1.1bn. The average amount transferred out was £400,000 and in around 20 cases the transfer value exceeded £1 million.
The committee noted that an outline plan to save Tata Steel UK, the “sponsor” of the BSPS, had been in place since May 2017.
But it said those signatories to the deal – Tata, the UK government and Pensions Regulator – had neglected the pension scheme’s members.
Committee chairman Frank Field said: “Once again we find the pensions regulator fiddling while Rome burns, when it should have seen this rip-off coming.”
He added: “All the responsible authorities must act, now, to stop more people being cheated.”
The financial advisers’ regulator, the Financial Conduct Authority (FCA), also faces serious criticism for how it handled concerns over mis-selling.