A letter has been sent to members of parliament (MPs) concerning the amount of compensation offered to steelworkers caught up in the British Steel pension transfer saga.
Founding member of CHIVE, a pro bono group that was set up to help the steelworkers, and IFA Alastair Rush has written to Work and Pensions Committee chair Frank Field, and Welsh constituency Labour MPs Nick Smith and Steven Kinnock.
The letter, seen by RP’s sister title Professional Adviser, claimed that the methodology being used by the Financial Services Compensation Scheme (FSCS) to calculate the steelworkers’ compensation disadvantages them in several ways, leaving them inadequately compensated.
Rush’s letter to the MPs said: “The perversity of [the situation] beggars belief. [The steelworkers] were nobbled by the system when they took advice, and now the system is nobbling at them, and suggesting some need not be compensated at all, after it accepted they were ripped off.”
Rush is hoping for an audience with the MPs in Westminster to talk through the situation and discuss a way forward.
He added: “I have a delegation of a few dozen who wish to make the trip, and I know that the media is interested in covering it. It’s a shocking thing indeed if we let the victims of the biggest pension tip off story fade into obscurity, having only half helped them. My diary stands ready to accommodate you all.”
Clarke Willmott solicitor Philippa Hann, who is representing the steelworkers, said the the main areas of concern relate to the estimated fee costs, the FSCS’s take on the value of the pot, and the discount rate used by the FSCS to calculate compensation being incorrect.
Hann explained: “The allowance given for fees is inadequate as most of the clients are paying significantly more than that, the discount rate requires them to take risks in circumstances where we are saying they should never have been asked to take any market risk.”
Hann also said the FSCS is calculating compensation based on a particular date, rather than the pension transfer value, and since that date the market has dipped. As a result, the value of some of the pensions are now worth less than they were on that date, with one steelworker’s pension valued at some £25,000 less.
“This just shows how unfair it can be to put all the risks on the shoulders of the steelworkers,” she continued. “The assumed return, plus the low level of fees that has been assumed, means some of them are being told they are in a better position now than they would have been had they stayed in British Steel Pension Scheme 2. They are not being properly compensated.”
The FSCS has been contacted for comment.
The plight of the steelworkers
In April, the steelworkers who transferred their defined benefit pensions with Active Wealth UK, the since-liquidated advice firm at the centre of the British Steel saga, took the first steps towards instigating legal proceedings against “all parties involved in the process”.
Active Wealth UK worked with unregulated introducer firm Celtic Wealth Management, which received accusations of giving unregulated advice to some British Steel workers.
Earlier this year the steelworkers told Professional Adviser details of the various plights they were now facing. Some said they were told to fill in a risk questionnaire only at the end of the process to “keep the FCA happy”, while others were told it was a “no-brainer” to leave their defined benefit pension scheme.