You are here: Home - Retirement - Retirement planning - News -

Government, Tata and regulators failed British Steel pension holders

Written by:
A report by MPs into the British Steel pension scheme says members were targeted by ‘vulture’ financial advisers.

Tata Steel announced a restructuring of the £14bn pension fund to keep the loss-making group alive. The restructuring offered members a number of options, including switching out of the fund. This saw them targeted by financial advisers and so-called ‘introducers’, who encouraged them to switch. For some members, this was a poor course of action that saw them miss out on a lifetime of guaranteed income.

The Work and Pensions Select Committee said this led to a “major mis-selling scandal” and the government, Tata and regulators failed to protect 124,000 members adequately.

The 39-page report urged the FCA to ban the use of ‘contingent charging’ – whereby financial advisers received a fee for transfer advice. It said it is “a key driver of poor advice” and added “genuine independence is not compatible with a charging model that only rewards advisers for recommending a particular course of action.” Advisers get paid if the member transfers their pension, but don’t receive anything if they don’t.

National financial planner LEBC welcomed the Work & Pensions Select Committee call for a ban on contingent charging. Kay Ingram, director of public policy at the group said:  “We agree that contingent charging should be banned. It is not a practice which LEBC employs, as we believe it is important to maintain a neutral approach when advising on pension transfers. We charge a fixed fee for advice, regardless of the outcome of that advice. Those who charge contingent fees will inevitably have a bias towards recommending a transfer.

“For many defined benefit pension scheme members, staying in the scheme for the majority of their working life and retaining the promise of a guaranteed retirement income is the right thing to do. It is only when retirement is near term and there are special personal circumstances that may make a transfer beneficial to the member or their family, that individuals should consider whether a transfer will be in their interests. We understand the argument used by some, who charge contingent fees, that not everyone has the funds available to pay for advice out of their own pocket. We do not agree that this justifies contingent charging.”

The group believe that the key to making advice more affordable is via workplace education, enabling scheme members to understand their options before seeking individual advice, but also to encourage employers to make employer sponsored advice available to staff- tax free up to £500 per person per year. Using a combination of technology and human interaction – so-called “bionic “advice – should also help address the problem.

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Are you a first-time buyer looking for a mortgage?

Look no further, get the help you need by searching for your perfect mortgage

Five ways to get on the property ladder without the Bank of Mum and Dad

A report suggests the Bank of Mum and Dad is running low on funds. Fortunately, there are other options for st...

The essential Your Money guide to the April 2018 tax changes

As we head into the 2018/19 tax year, a number of key changes take place to existing policies while some new i...

A guide to switching energy provider

All you need to know about switching from one energy supplier to another.

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Having a baby and your finances: seven top tips

We’re guessing the Duchess of Cambridge won’t be fretting about maternity pay or whether she’ll still be...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co... Awards 2018

Now in their 21st year, our awards recognise the companies offering the best products and services to consumers

Money Tips of the Week

  • According to @YourMoneyUK the #Govt is considering a Care ISA’ which would be exempt from #inheritancetax. Could th…
  • RT @unitetheunion: “We need tough action against unscrupulous debt collection agencies who prey on people’s misery to ramp up the debt thro…
  • RT @unitetheunion: “We need tough action against unscrupulous debt collection agencies who prey on people’s misery to ramp up the debt thro…
Read previous post:
Energy regulator should tighten licence conditions to protect users

The head of energy at a major charity says the energy regulator needs to tighten its process when awarding supplier...