Tim Sargisson: Steel yourself for another pension scandal

Some of the stories about advice to British Steel Pension Scheme members shame financial services, says Tim Sargisson, and until such behaviour stops, the sector will always struggle to be viewed as a true ‘profession’

As a small boy I still remember the sense of awe crossing the then recently opened Severn Bridge, with its 988-metre centre span and 29,000km of steel cables. It was a triumph of engineering and has stood the test of time as it enters its fifth decade.

Without British Steel it is uncertain whether the solid foundations would have existed to create this behemoth. It is, however, becoming clear that phrases, such as ‘solid foundations’ and ‘standing the test of time’ are unlikely to be attributed to the firm’s pension arrangements.

Every one of the 130,000 steelworkers who are members of the British Steel Pension Scheme (BSPS) have until 22 December to decide whether to move their defined benefit (DB) pension pots to a new plan being created – BSPS II. The remaining option is to stay in the current fund, which will then be moved to the Pension Protection Fund.

Important decisions to be made, then – against which is the need to be clear on how much to spend in retirement, so you do not run out of money, which is the most complex financial decision anyone has to make. Even Nobel prize-winner Bill Sharpe described it as “the nastiest, hardest problem in finance”.

For some in the industry, this seems less about an opportunity to advise and try to guide people through this process and more of a sales opportunity to earn easy money in the run-up to Christmas.

We now hear of steelworkers being lured by cheap deals by unregulated introducer firms, with the Financial Times reporting on a “feeding frenzy” by pensions advisers and one Tata worker telling BBC Wales he has lost almost £200,000 by transferring out of the British Steel Pension Scheme after seeking advice from a local firm. At the time of writing, the FCA reports 17 companies are being investigated over their handling of pensions advice to steelworkers.

This type of behaviour seems to crop up with the regularity of an unloved season and shames every one of us in this industry. Until this sort of behaviour stops, we will always struggle to be viewed as a ‘profession’ in the true sense of the word.

The view of many is to blame the regulator – and in this situation it is hard to disagree. For a start, a decent register would be helpful for members of the public looking for advice and one that includes details of firms who have qualified pension specialists.

Instead, what we have is the FCA choosing to dismantle the register, which makes little sense. As Rory Percival previously told Professional Adviser, the proposals would mean consumers had “one less step to protect themselves”.

“For the person on the street receiving advice, or who maybe had concerns about their adviser, they would no longer be able to check the authorised status of that adviser,” he explained. “This may widen the scope for unauthorised advisers and scammers.” That seems especially relevant when it appears more than £42m has been lost to “pension liberation fraud” since April 2014.

Army Of Spivs

All in all, then, we leave 2017 with little evidence to support the August 2015 pledge from the Financial Advice Market Review. This is the statement about looking at ways the government, industry and regulators could take individual and collective steps to stimulate the development of a market that delivers affordable and accessible financial advice and guidance to everyone, particularly those who do not have significant wealth or income.

Instead we read about an army of spivs descending on Tata’s steelworks to look at ever more lucrative ways to separate pension scheme members from their hard-earned pension.

When it opened in 1966, the Severn Bridge was also described as an ugly concrete and steel blot on the landscape. It seems to me that unless the regulator acts fast, this scandal has all the hallmarks of being another ugly blot on the pensions landscape.

Published on 19th December