£715m pension pot fees bonanza

Savers’ nest eggs at risk as sharks cash in on a...

PENSION advisers have pocketed £715m by persuading savers to give up their guaranteed income in retirement.

Some 220,000 people have transferred their nest egg out of a defined benefit pension scheme since rules were changed in 2015 – shifting £50bn of cash in total.

The average fee charged by advisers is £3,250, according to the Financial Conduct Authority (FCA). That would mean a windfall of £715m for advisers.

But it is feared that unscrupulous firms are targeting retirees who have little knowledge of financial services – particularly when their pension schemes are changing, such as at the Tata UK Port Talbot steel plant in Wales.

Some companies use aggressive sales tactics ranging from cold- calling and hassling targets on Facebook, to offering free meals, cash and even standing outside factories to talk to staff.

Although many people will have a good reason for transferring their cash out of a defined benefit pension scheme – swapping a guaranteed annual income for a one-off lump sum – in some cases it is the wrong thing to do.

Regulators and campaigners insist that unbiased advice is essential.

Former pensions minister Baroness Altmann said: ‘It shouldn’t be a gravy train to jump on, it should be an analysis of what the right thing is to do.’

Concerns came to a head this week as it emerged Tata UK steel workers were being preyed on.

They are facing a major restructuring of their £15bn pension scheme, creating an opportunity for advisers to make huge profits. One business organised chips and curry nights where staff could talk about transferring, and another arranged one-to- one meetings in a nearby hotel.

Al Rush, of advice firm Echelon Wealthcare and investment site Fiver A Day, who went to Port Talbot to investigate, said he had heard of one case where a saver was charged £20,000 for withdrawing a pot of £500,000.

He said pension vultures were flying in from as far away as Newcastle and the South East to sign people up. Victims are being promised unrealistic returns as high as 10pc a year, he said.

‘They’re signing people up over lunchtime – one adviser is getting people to turn up with their paperwork at seminars and transferring them there and then,’ said Rush. ‘I know one worker who had his money transferred out and now doesn’t know where it is.’

A total of 11,000 steel workers have inquired about transferring transfe their cash, and around 1,700 have done so.

Former pensions minister Sir Steve Webb said this figure is bound to rise.

Parliament’s Work and Pensions Committee is now rushing out a report to stop any more damage.

Its chairman, Labour MP Frank Field, said: ‘Steel workers are being besieged by these rogues.’

Tony Brady of trade union Unite said: ‘We are very concerned about rogue advisers and sharp practice – we are aware of what’s happening at Port Talbot.’ The FCA is also looking into what has been going on at Port Talbot.