Steelworkers to lose out in pension chaos

THOUSANDS of steelworkers are likely to lose some of their pension benefits in the rush to close their retirement scheme before it gets too expensive, the man in charge has warned.

The 122,000 members of the British Steel Pension Scheme (BSPS) are choosing whether to stay with the scheme as it joins the Pension Protection Fund (PPF), join a new one set up by Tata Steel, or transfer to a personal plan.

But the process has descended into chaos after local financial advisors were overwhelmed and pension sharks charging sky-high fees flooded into steel heartlands in a bid to encourage workers to transfer their retirement pots.

Workers and pensioners who do not decide by Friday will fall by default into the PPF, resulting in a reduction in retirement incomes for most. Although the new Tata scheme is also less generous than the old British Steel scheme, BSPS trustees chairman Allan Johnston and Community union chiefs believe it still represents the best option in most cases.

Johnston told MPs the deadline to choose cannot be extended beyond Friday because of the time it takes to ensure the scheme can go into PPF assessment by the end of March.

The date was chosen because £200m will otherwise be added to the scheme’s costs on April 1, which it cannot afford. Johnston said trustees held 40 events at 11 locations over the latest five weeks to help members choose what to do with their pension pots, many worth around £300,000, in the short time.

But he added: ‘Despite our best efforts, and as we had feared, it seems likely that the numbers of pensioners defaulting into the PPF will be many thousands.’

The PPF disagrees that most pensioners would be worse off in its fold. Chief executive Alan Rubenstein said ‘most, but not all, BSPS pensioners would be financially no worse off or marginally better off in the new scheme’.

Tata is closing the indebted scheme because it is too expensive. But the short deadline and doubts over financial advice has caused chaos in Port Talbot and other steel heartlands.

Rogue advisors are accused of luring steelworkers with chicken and chips nights, charging fees of up to £6,000, and encouraging unreliable investments.

Frank Field, chairman of the Work and Pensions Committee, has written to financial advisors with a string of questions.

The MP said yesterday: ‘Transferring out of a gold-plated final salary pension is generally a terrible idea, except in very particular circumstances. Firms that are routinely advising people to take this route should be shut out of taking this type of business.’

The City regulator has tried to crack down on bad advice, probing 17 firms. But MPs have branded efforts to protect steelworkers grossly inadequate, saying it should have acted sooner and communicated better.