The number of British Steel Pension Scheme (BSPS) members who transferred out under the age of 30 is more than was once thought, RP’s sister title Professional Adviser has revealed.
Clark Willmott, a solicitor firm that has handled hundreds of claims relating to British Steel workers who received poor defined benefit (DB) transfer advice, has said it is acting for 29 clients who were under 30 when they were told to transfer.
The advice given to those 29 young men was given by 13 of the financial advice firms it is currently acting against. As Clarke Willmott is not the only firm helping steelworkers who have lost money, it is possible there are more young scheme members than the 29 revealed.
Clarke Willmott managing director of litigation Phillipa Hann said the firm also has a “surprisingly large number of people” under 40 who were advised to transfer out.
She said: “It is difficult to imagine many clear good reasons for people under 40 to be advised to transfer out of a final salary scheme, short of a terminal diagnosis.
“Our client(s) will also have been members of the replacement DC pension scheme to which many will have been contributing 6% and their employer a further 10%.
“None of the advice they received, and I mean none, took any account of these alternative pension savings in planning for the client’s future, nor attempted to advise on any planning for their future retirement which did not involve transferring out of the final salary scheme.
“Typically the reasons given for transferring in the suitability letters were a desire to retire early, flexibility of income in retirement and death benefits – all cut and paste motives which bore little resemblance to the true situation,” she said.
In addition, Echelon Wealthcare IFA Alastair Rush, who grew up in Port Talbot and set up an office in the steel town to better handle his work with steelworkers, said: “It doesn’t bear thinking about that so many young steelworkers were advised in such a way.
“Every decent financial planner should be screaming in anger at this. To save time, money and expense, the regulator could simply decide that as there is no conceivable case for scheme members this young to transfer out safely, and in the absence of any extenuating circumstances by their adviser, they should simply be default miss-sold.”
Transferred at 24 years old
Last month, PA interviewed possibly the youngest steelworker who transferred out at the age of 24. At the time, the steelworker said he was like any other young person and was not hugely concerned about his pension.
When he started his career, the British Steel pension scheme was renowned for being a good, strong scheme and, as a local boy himself, knew he would be set up when he eventually retired.
In March 2016, Tata Steel announced it would be examining options to restructure the business, which would include decoupling the defined benefit (DB) pension scheme from the company. Then, in December 2016, Tata Steel UK decided to close the scheme to further accrual from 31 March 2017.
A little more than a month after that date, in May 2017, the PPF announced that key commercial terms relating to the Regulated Apportionment Arrangement (RAA) – a restructuring mechanism that allows financially troubled employers to detach themselves from their DB pension liabilities – between Tata Steel and The Pensions Regulator had been reached.
Under those plans, Tata Steel set up and sponsored a new pension scheme, BSPS2, subject to the satisfaction of certain conditions relating to funding size. BSPS members were given the opportunity to move into the new scheme prior to the existing scheme entering the PPF, or to transfer out altogether. In total, almost 83,000 members of BSPS – of a total 130,000 – chose to move into BSPS2.
Some 39,000 members ended up in the PPF because they did not express a choice or because they chose to do so. Of the 44,000 members who were entitled to a cash equivalent transfer value (CETV), about 8,000 transferred their benefits away from the DB scheme.