Scale of steel pension crisis is ‘enormous’
A MIS-SELLING scandal which has resulted in retired and current steelworkers losing tens of thousands of pounds each from their pension pots could be the biggest crisis of its kind to hit Wales, according to a financial expert.
The scandal dates back only two years to the closure of the British Steel final salary pension scheme. The scheme ran for many decades, providing pensions to generations of workers employed successively by British Steel, Corus and Tata.
Then in 2017, at a time when Tata had been threatening to pull out of steel manufacturing in Britain, it decided it could no longer afford a final salary – or defined benefit – pension scheme. Instead it launched a less generous defined contribution scheme, where the amount of workers’ future pension payments would depend on the performance of the scheme’s investment portfolio.
Employees were given the option of allowing their final salary pension pots to be frozen, or to be transferred to a new provider. Financial advisers at that point descended on steel towns like Port Talbot and Llanelli, in many cases advising workers to transfer their pension pots. In many cases they charged exorbitant commissions. Al Rush, a financial expert who has been helping workers make compensation claims, said: “It is difficult to overestimate the impact of this scandal on steel towns.
“When tens of thousands of pounds are lost to each steelworker who transfers their pension pot, it’s the whole community that suffers because the money is taken out of the local economy.
“The scale of what has happened is enormous, with many millions of pounds having been lost. Some financial advisers have charged commission of up to 3% of an individual pension pot’s value, enriching themselves but reducing the value of steelworkers’ pensions.
“It’s the biggest mis-selling scandal to hit Wales.
“Steps are being taken to get compensation for those affected, but no-one will be in a better position than they would have been if they hadn’t transferred their pension pot.”
Andrew Stanlake has worked at Trostre Works in Llanelli for 34 years. He said: “Like a lot of the boys, I was persuaded to transfer my pot. I just hope I can get compensated.”
The Pensions Ombudsman and the Financial Conduct Authority are investigating the scandal.
Aberavon Labour MP Stephen Kinnock said: “It’s deeply concerning that these vultures swooped and persuaded workers to transfer their pension money. Unfortunately it led to a situation where many workers have
been left worse off than they would have been.”
A spokesman for Tata referred us to the trustees of the British Steel Pension Scheme. The trustees’ website includes a statement of advice to members of the scheme who are contemplating transferring their pension pot to another provider.
It says: “You should think carefully before transferring out. You would be giving up guaranteed future pension income in return for income that might not be guaranteed and could vary depending on how you manage it. Even though transfer values can seem very large, transferring out is unlikely to give you as much total pension income over your lifetime as the scheme, on a likefor-like basis.”
A spokesman for the Community trade union said: “Unfortunately, legal constraints around who is able to provide financial advice meant that our hands were somewhat tied and we weren’t able to be as forthright as we would have wanted to be in terms of warning our members about some of the pitfalls of transferring pensions out of a defined benefit scheme.
“We have been approached by a small number of members who feel that they may have been mis-sold transfers and we are guiding them through the processes available to seek compensation.”