There is something otherworldly about the view of the steelworks from the train as it pulls into Port Talbot in South Wales, as the picturesque countryside is suddenly overtaken by an industrial behemoth.
The eye cannot take in all the chimneys, smelters and pipes that shoot out in every direction. Director Ridley Scott was so impressed that they inspired the opening scene of his seminal film Blade Runner, where flying cars soar past pyramid skyscrapers spitting out flames.
The plant’s flair for the dramatic does not only stir the imagination of filmmakers or first-time visitors, but also the lives of those who work there. The story of what happened to the members of the British Steel Pension Scheme over the past six months since it formally closed would make a compelling film. While the script would have elements of tragedy, with some vulnerable people being parted from their life savings, it also has its heroes, too.
The story of what happened to the members of the British Steel Pension Scheme would make a compelling film
There has been a spirited effort from conscientious advisers to limit the damage amid ongoing legal action by scores of people who transferred out of the BSPS and are seeking to recover their money from the collapsed advice firm Active Wealth.
Both Active Wealth director Darren Reynolds and Clive Howells, head of introducer firm Celtic Wealth Management, which placed business with Active, became notorious for skipping demands to appear before MPs on the work and pensions select committee in December 2017.
Six months on, what can these key players and their stories tell us about what unfolded in the BSPS, and what lessons can be learned to ensure that unsuitable defined benefit pension transfer advice is not given again?
Money Marketing looks at both the numbers behind the saga, but also the individual experiences of scheme members and the advisers who helped them, after nine members gave emotional testimonies at the Great Pension Debate last week.
The beginnings of a crisis
In spring last year the immediate worry of many in Port Talbot was not their pensions, but their jobs, as the steelwork’s owners Tata Steel talked about pulling out of the UK. It said it was losing a million pounds a day in its UK operation, Tata Steel UK, and wanted to merge with German firm Thyssenkrupp to consolidate its European operations and cut costs.
There was considerable uncertainty about the future of Britain’s entire steel industry.
The Port Talbot works employed thousands of people. Its pension scheme had £15bn of assets under management and about 130,000 members. Talks about the fate of the pension fund slowed up the negotiation between Tata Steel and Thyssenkrupp as The Pensions Regulator worked to ensure that liabilities were not dumped on to the Pension Protection Fund.
Trustees at BSPS were under pressure to safeguard pensions, but in a way that ensured that the sponsoring employer did not collapse.
There has been a spirited effort from conscientious advisers to limit the damage
Meanwhile, politicians argued that the country could not afford to lose such a strategically important industry as steel, and trade unions lobbied to defend jobs and pensions.
All of these parties had a legitimate stake in the negotiations to find a compromise between the jobs and pensions of steelworkers as well as their own interests.
The eventual deal separated BSPS from Tata Steel. The pension scheme was to receive £550m from Tata, as well as a 33 per cent equity stake in Tata Steel UK.
The trustees also managed to secure funding to create a new British Steel pension scheme, alongside promises of investment in the Port Talbot plant from both Tata Steel UK and Thyssenkrupp as part of the merger.
Trustees gave the green light for the new scheme to go ahead in March and the merger between Tata Steel UK and Thyssenkrupp was finalised at the end of June.
31 March 2017: BSPS closes to future accrual.
11 August 2017: Trustees announce agreed terms for a deal to separate BSPS from Tata Steel.
11 September 2017: The Pensions Regulator approves deal to split scheme from Tata Steel UK. BSPS receives £550m from Tata Steel together with a 33 per cent equity stake in Tata Steel UK.
4 October 2017: Individual information packs start being sent out to members. 125,000 are eventually sent.
6 December 2017: BSPS extends guarantee period for transfer quotations until 26 January.
13 December 2017: At a hearing of MPs, BSPS trustee chairman Allan Johnston says he has personally signed off 20 transfers of pension pots worth more than £1m.
22 December 2017: Deadline for members to choose what happens to their pension expires.
26 January 2018: Final deadline for transfer quotations expires.
February 2018: Midlands-based Active Wealth is the first BSPS advice firm to go into liquidation.
14 March 2018: Trustees say the new British Steel pension scheme has met the minimum size and initial funding tests to be created.
15 March 2018: Some BSPS members did not receive suitability reports from advisers before they transferring out, according to testimony published by the work and pensions select committee.
April 2018: A large group of steelworkers launches legal action against Active Wealth to reclaim pension pots.
June 2018: Retirement & Pension Planning Services, based in Barnsley, is the second BSPS advice firm to go into liquidation.
While a cursory glance would suggest everyone was a winner in the deal, a closer look shows this is not the case.
Time to Choose
Things started to go wrong for some steelworkers during the consultation that informed members about the choices around their future pension arrangements.
The Time to Choose consultation ran from October 2017 to January this year and gave 122,000 BSPS members several choices about what do with their pensions.
The choices included: staying in the original scheme, known as BSPS 1, which was to go into the PPF; moving to the new scheme called BSPS 2 with better benefits; or transferring out entirely.
Just under 97,000 members completed and returned their option forms, of whom 86 per cent chose to switch to BSPS 2 or transfer out entirely. Fourteen per cent chose to move into the PPF.
Adviser view: Kate Shaw, director, Financial Life Planning
The most awful thing was that the steelworkers did what they were told, checked with the advisers they used and still they were treated terribly. It was the worst abuse of their trust, and left them feeling foolish, which they are not, and they were affected along with their families.
This is not going to go away. It is now part of their lives and the consequences have been far reaching. Although these steelworkers are not financially savvy, they are not stupid and were checking things. Their experience shows DB transfers are complicated and you need a financial adviser. Unfortunately they did not get an adviser but a sales person.
It is awful from a humanitarian point of view. I was sitting next to an adviser who was not Operation Chive like me, but is a decent adviser and was appalled by what he heard. I saw those suitability reports and these people are still badly affected and will probably be so for years.
Some of them made the point that they had already given up part of their pension benefits to help the company survive and then they were exploited by these advisers.
The pension was always the carrot for working hard on the night shifts. They agreed to the pension changes and were sold up the river anyway. There was a collective emotional response from the advisers in the room.
One of the advisers stood up and apologised to the steelworkers on behalf of the entire industry. It was very moving, as he said :“We’ll do all we can to ensure this never happens again”.
However, more than 25,000 members did not return their option forms. The fact that a fifth of members failed to tell the trustees what they wanted to do with their pensions through the consultation was not the only problem.
In a work and pensions select committee hearing held on 13 December, BSPS trustee chairman Allan Johnston admitted that the amount of interest members expressed in transferring took him by surprise.
He said: “We have had 12,200 people apply for a transfer-out quotation. Dealing with that massive upsurge has been almost impossible. You cannot just hire in staff to do this, because it is very detailed and it has to be done correctly. To put it into perspective, there are 18 people in the administration office.”
MPs also learned that a member called the BSPS office 207 times for additional information, and when they finally got through, the helpline did not have the right information.
The website and helpline were initially set up to answer questions about the original scheme BSPS 1 heading into the PPF and the new scheme BSPS 2. There was no dedicated support for external transfers.
In January, Money Marketing contacted the trustees about whether more could have been done to help members with queries about transfers.
Then, a BSPS spokesperson said: “Despite the higher than expected interest in transfer activity and the significant additional workload arising from the Time to Choose exercise, the trustee has been able to generate cash equivalent transfer value quotes and to process transfer requests in accordance with statutory timelines, and fully expects to continue doing so.”
At last month’s Great Pension Debate – an adviser-organised DB transfers focused event based in Port Talbot – members of the BSPS said they felt there had been a lack of support from trustees concerning their pension options.
It was this lack of support, members argued, that created an opportunity for various players to come in and exploit their limited knowledge of pensions. For example, some members said they did not receive suitability reports from advisers before they transferred out of the scheme.
A member called the BSPS office 207 times for additional information, and when they finally got through, the helpline did not have the right information
The testimonies echo those published by the work and pensions select committee in March that shed light on the transfer advice steelworkers received.
This was in areas such as exit fee charges and the sales tactics and bias towards transferring, including the involvement of unregulated introducers.
These lead generators such as Celtic Wealth arranged meetings with steelworkers in pubs, with offers of food, such as sausages and chips. Regulated advisers then paid them a fee for the introduction to the new clients, and further fees should transfers go ahead in some cases.
Accusations are still circling around the fees that were paid to unregulated lead generators and regulated financial advisers from esoteric investment providers and discretionary fund managers that accepted the steelworkers’ funds after they transferred.
However, it is also becoming clear that the BSPS saga has shown the best side of the advice profession.
In the House of Commons just this week Liberal Democrat pensions spokesman Stephen Lloyd tabled a motion to thank all of the financial advisers who, as part of Operation Chive, have offered their services to the steelworkers in Port Talbot on a pro-bono basis.
Case studies: What really happened to BSPS members
One retired steelworker Malcolm Sibthorpe burst into tears during a panel at the Great Pension Debate.
Sibthorpe says he only had a risk assessment done after he had transferred out of the scheme, and the consultation created terrible pressure, as there was not enough time to make an informed decision about his pension.
He says: “I feel like a dick for what has happened to me”.
His story is not an isolated one. Another steelworker says he was referred to an advice firm that did not give him a suitability report while colleagues were getting “40 page dossiers” about how to transfer out.
That person says the advice to transfer was biased towards moving out of the scheme and only once
the transfer occurred did an employee of the advice firm visit his home to do a risk assessment.
Equally memorable is Chris Cook’s experience. The 51-year-old says his suitability report was not given to him until he signed to transfer his pension to a DFM. He received calls from an unregulated introducer to see if the money had been transferred over to the DFM.
The adviser who recommended the transfer said the risk assessment was a tick-box exercise just to keep the FCA off their back, Cook says, and told him his money would be put into an ultra-conservative fund.
Although Cook wanted to transfer his pension to Royal London, the adviser argued it could only manage the upside of investments, and so a research company was needed to manage the money better in a downturn.
The adviser drew a graph on a piece of paper to illustrate the benefits of this research company to Cook, but did not provide him further details, Cook claims.
Cook ended up losing around £35,000 in total from the beginning of November 2017 to March 2018.
He adds: “Ultimately I would like to get my £35,000 back and see various people prosecuted.
“When it comes to the lack of support we had, the trustees told us the scheme was going to close but no one sat me down and told me what the PPF was. All I knew was that my benefits would be cut by 10 per cent going to the PPF.
“Other members had far more comprehensive support from financial advisers and told them what they would get, and I got none of that.”
Some, like Paul Watson, 56, were more fortunate than the others as he did not transfer out of the scheme, but he says his suitability report was riddled with inaccurate information.
These testimonies brought some of the advisers involved in Operation Chive, the pro-bono adviser-led initiative to give help and guidance to steelworkers, to tears at the event as the full extent of the unscrupulous practices was revealed.
Expert view: Ray Adams, director, Niche IFA
British Steel can show the good side of advisers if we trust the regulator
We are letting the public down because they want advisers but cannot find one to help them. My experience of British Steel is a good example of this, as my firm was overwhelmed by what happened there.
Our phone went absolutely mad last year. How many inbound calls do you estimate we received in 2017 from steelworkers? It was 658 and I would suggest if you receive 658 unsolicited calls it will put a strain on your business. We had about 10 calls a day and I closed our company’s doors on 10 October to new BSPS clients.
I had been contacting the FCA from the end of October to draw their attention to the capacity issue concerning BSPS. Good advisers could not talk to enough clients and I was worried about client outcomes. We closed six weeks before anyone was reading about these issues in the press. Many started to read about BSPS only in November.
I got involved in BSPS, both as a financial adviser and also because this is personal to me. I have five family members who are or were steelworkers and I am also proud to be a financial planner, and we were not doing a very good job here.
I got involved in BSPS, both as a financial adviser and also because this is personal to me
Even though I brought BSPS to the attention of the FCA, our firm got a visit from it and quite rightly, in my view. What happened during that visit was an interesting experience. We supplied all the information the FCA requested and my staff emailed fact finds and suitability reports to Canary Wharf.
We had six supervisors working on our firm and three of them visited us in December. The three FCA supervisors who turned up were very professional and knew their stuff. So do not think kids will turn up and just tick boxes when inspecting your firm. They checked our files thoroughly on site.