Steelworkers asked to fill in risk questionnaires to ‘keep FCA happy’

Hannah Godfrey reports...

Former British Steel pension scheme members have told Professional Adviser they were only asked to fill in risk questionnaires at the end of the transfer process as a “formality” to “satisfy the FCA”.

RP’s sister title Professional Adviser has now spoken with a number of steelworkers who transferred out of their defined benefit pension after dealing with advice firm Active Wealth UK and unregulated introducer Celtic Wealth Management.

When it came to assessing their attitude to risk, they said, neither Active Wealth UK’s Darren Reynolds and Andrew Deeney nor Celtic Wealth Management’s Clive Howells and Liam Powell appeared interested in the results of any risk questionnaire. All the steelworkers Professional Adviser spoke to were only asked to fill in a form at the very end of the pension transfer process.

One steelworker said: “I filled that form in basically after I’d signed everything. They just said it was a formality – something you need to sign. I was told nobody would look at it anyway. There are at least 20 people I know of who were told exactly the same.”

Another worker said he was told he had to fill in the risk questionnaire so it “satisfies the FCA” while, similarly, yet another said he was told to do so “to keep the FCA happy”.

Informed Choice managing director and IFA Martin Bamford underlined the process of understanding a client’s attitude to risk should begin early on.

“I can’t see how it would be appropriate to leave risk until near the end of an advice process – especially where the advice concerns a defined benefit pension,” he said. “Understanding client attitude towards risk, as well as their capacity for risk and need to take risk to achieve goals, is a critical part of the important decision to transfer to a private pension.”

He continued: “I can only assume that deferring the risk questions until towards the end of the advice process was a calculated move designed to avoid this important topic until after a decision to transfer had been made.”

‘No brainer’

The steelworkers told Professional Adviser that, from the start, the men involved had had only positive things to say about pension transfers and failed to mention any potentially negative impacts from transferring out of the British Steel Pension Scheme (BSPS). One man was told it was a “no brainer” to transfer his pension, while another said: “I’ve had salesmen come to the door who weren’t as good as these two.”

One steelworker has since begun to work with a different adviser who has classed him as a vulnerable client owing to an accident at work that left him suffering from post-traumatic stress disorder.

The firms he initially met had played up to this by telling him a pension transfer could lead to early retirement, he said, adding that he was told “you don’t want to be working there much longer” and “they’ve tried to get rid of you – you want to get out of there and get this money out”.

The steelworkers who worked with the firms had their pensions placed into a Newscape-owned fund via discretionary fund manager Gallium Fund Solutions. The fund carries a 5% exit fee if investors sell out in fewer than five years. None of the steelworkers Professional Adviser spoke with had been made aware of any exit fee during the pension transfer process.

“There was no mention of a 5% charge if you come out within five years,” said one; “[he said] the charges would be 0.6% to 0.7%,” said another; while another said he was “unbelievably misled” on fees.

All the steelworkers Professional Adviser spoke to reported Active Wealth UK and Celtic Wealth Management working very closely together. Each firm was said to have attended meetings with individual steelworkers together, from the first meeting to the last.

The workers told Professional Adviser the men would back one another up, working together to sell the idea a pension transfer was the best option for each of them – though some were subsequently told by different advisers they should never have been advised to transfer out.

‘No detailed discussion’

A letter from Work and Pensions Committee chair Frank Field to Financial Conduct Authority director of supervision Megan Butler dated 26 February included extracts of emails sent to the committee from steelworkers that reflected the conversations Professional Adviser has had.

One steelworker, for example, told the committee “at no time did I have a detailed discussion regarding my decision” while another said Celtic Wealth Management had asked if his wife also had an occupational pension and offered to look at transferring hers too.

Professional Adviser has reached out to both Active Wealth and Celtic Wealth Management numerous times during the BSPS saga but has yet to receive a response from either.