LONDON (Reuters) – Britain’s markets watchdog was too sluggish to stop “vulture” monetary advisers from ripping off steelworkers confronted with vital selections over their 14 billion pound ($19.four billion) pension pot, lawmakers mentioned in a report on Thursday.
Advice on transferring pension pots and the punitive charges charged had been one other main mis-selling scandal, parliament’s work and pensions committee mentioned within the vital 39-page report.
Following the closure of the present Tata Steel UK (TISC.NS) pension scheme – to pave the way in which for a merger with the European metal operations of Germany’s Thyssenkrupp (TKAG.DE) – steelworkers had been compelled to decide on by December 2017 between moving to a brand new company scheme or becoming a member of a lifeboat generally known as the Pension Protection Fund (PPF).
The report mentioned members would have sometimes been higher off moving to the brand new company scheme.
The previous pension scheme is a legacy from earlier proprietor British Steel and a few 25,000 of its 124,000 members failed to answer the December deadline, that means they are going to find yourself within the PPF by default as a result of they had been too overwhelmed to make an knowledgeable selection, the report mentioned.
Under Britain’s new “pension freedoms” reforms, employees may additionally put the money into different investments, however a lot of these who took this selection had been suggested to enroll to dangerous, unsuitable investments that got here with hefty charges.
Steelworkers had been shamelessly bamboozled by doubtful monetary advisers in tandem with unregulated, parasitical introducers who wooed purchasers with sausage and chips lunches in return for a share within the charge, the report mentioned.
Transfer values averaged 400,000 kilos and respected advisers had been overwhelmed, creating the proper situations for vultures to take benefit, it mentioned.
Lawmakers singled out contingent charging, the place advisers are solely rewarded for recommending a specific plan of action. The follow ought to be banned for outlined profit pension switch recommendation, they mentioned.
“To propose, as the Financial Conduct Authority did in July last year, abandoning the advisor presumption against transferring out of a gold-plated, stable, indexed pension scheme: it really makes you wonder whose side they’re on,” committee chair Frank Field mentioned in a press release.
A surge in curiosity within the steelworker pensions started in April final 12 months however the FCA, which regulates advisers, didn’t start appearing till November, simply forward of the deadline, the report mentioned.
The FCA mentioned it has taken “detailed, extensive and robust action” to assist the steelworkers.
“We are also reviewing the rules that apply to firms advising on pension transfers, and will consider this report as part of this,” the watchdog mentioned.
PENSION REGULATOR CRITICIZED
Lawmakers additionally criticized the Pensions Regulator, which oversees schemes, saying it ought to have seen this “rip-off coming” and may evaluate the knowledge given to folks confronted with pension selections.
The Pensions Regulator mentioned it helped to sort out unscrupulous advisers and fulfilled its main position in evaluating and approving the complicated restructuring of the British Steel pension scheme to stop the company changing into bancrupt.
“We believe this was the best possible outcome for everyone involved in what was a very challenging situation, bringing greater certainty for thousands of scheme members,” it mentioned.
The report calls on the government to vary pension guidelines in order that pots are transferred to a brand new company scheme by default if it gives higher advantages than a pensions lifeboat.
The committee mentioned it’s going to additionally produce a separate report on broader pension freedom and selection points raised by the steelworkers’ case.
Some 50 billion kilos has been transferred from direct profit pension schemes between the beginning of the pension freedom reform in April 2015 and May 2017.
Reporting by Huw Jones; Editing by Kirsten Donovan