The Pensions Regulator “urged” trustees at the British Steel Pension Scheme to talk to members about the importance of getting independent financial advice, according to a report published today.
The report explains how the regulator viewed financial advice for transfers when it assessed the application from Tata Steel UK for a regulated apportionment arrangement and separately its proposal for a new pension scheme.
In early 2016, Tata Steel decided that it was no longer prepared to continue funding Tata Steel UK, or consider funding a turnaround plan, without a restructuring of the scheme.
TPR insisted that cash be provided upfront to the BSPS by Tata Steel, which eventually offered a payment of £550m, along with a 33 per cent equity stake in Tata Steel UK.
The report elaborates what measures TPR took to help the scheme’s 122,000 members understand several choices about what to do with their pensions.
The choices included staying in the original scheme known as BSPS 1 and going into the Pension Protection Fund, moving to the new scheme called BSPS 2 with better benefits or transferring out entirely.
The report says: “In this case, we have been in close contact with the trustee about member communications, and have reviewed the documents the members have been given, along with materials that have been presented at a series of nationwide roadshows.
“We have also urged the trustee to talk to members about the importance of obtaining independent financial advice, and asked them to give out our pension scams leaflet when sending out other communications about their decision, as per our published guidance.”
Regarding the appropriateness of pension transfers out of a final salary scheme, TPR adds: “Our view is that generally it is not in members’ best interests to give up the certainty of income available from a DB scheme in favour of reliance on a defined contribution scheme.
“We are aware of significant concerns about the advice given to some members’ considering this option by certain financial advisers and have worked with the FCA and The Pension Advisory Service to ensure that affected members were made aware of the appropriate sources of advice and guidance in order to help them consider their options.”
Just under 97,000 members completed and returned their option forms, of which 86 per cent were from members choosing to switch to BSPS 2 and 14 per cent were from members choosing to move into the PPF.
Over 25,000 members will go into the PPF at the end of March as they have not returned their options form.