Thousands of British Steel pension savers have been “left out of pocket” with some suffering losses of up to £489,000, a report by the public spending watchdog has found.
The 8,000 savers who fell victim to pension regulation failures, were persuaded to transfer out of the British Steel Pension Scheme (BSPS) by advisers in 2017, after British Steel’s then-owner Tata Steel experienced financial difficulties.
The National Audit Office (NAO) has now found that the steelworkers “have suffered significant financial losses because they were provided with unsuitable advice … and they have not been compensated fully”.
The NAO predicts the members of BSPS, a large defined benefit (DB) pension, have been hit by a collective loss of £18million.
The average loss for BSPS claims resolved by the Financial Services Compensation Scheme (FSCS) is £82,600, with individual losses being as high as £489,000.
Many thought the income would be guaranteed as DB schemes are highly protected, often being described as “gold-plated”.
A steel worker takes a sample of raw iron from a blast furnace at Europe's largest steel factory in Duisburg
Wolfgang Rattay
A worker walks past reels of steel at an Arcelor steel plant
Vincent Kessler
Only a quarter of members who transferred out of the BSPS have so far sought redress through complaints.
The Financial Conduct Authority has come under fire following the scandal and has been accused of “failing to protect” pensions savers.
Dame Meg Hillier, chair of the public accounts committee, to say the case “was a failure from top to bottom … The FCA, whose job it is to regulate these firms, was asleep at the wheel".
Gareth Davies, the head of the NAO, said: “Although measures have been put in place aimed at improving how the pensions advice market is regulated and to attempt to remedy the financial losses suffered by British Steel Pension Scheme members, it is clear that many people have not been compensated fully under current arrangements.
“The BSPS case demonstrates the costs and difficulties of remedying failures in financial services and the importance of preventing problems from occurring in the first place.”
An FCA spokesperson has said: “We welcome the report, which highlights the complex issues for Government and regulators which arose from the exceptional circumstances around BSPS and the framework for pension freedoms.
“We recognise the harm these circumstances caused to steelworkers and communities, and that’s why we continue to work to ensure that former British Steel Pension Scheme members who lost out financially due to poor advice receive compensation.
“We’ve taken significant action, including since the Rookes Review in 2019, to support them already and are preparing to consult on a consumer redress scheme for BSPS members by the end of March.
“We’ve already acted to raise the standard of pension transfer advice more generally – by introducing new rules, as well as working with our partners to ensure that consumers are supported to make decisions about their pension."