Steelworkers had a ‘gun to the head’ over pension transfers
The former boss of the City watchdog has said that British Steel pensioners had a gun to their head as they made one of the most complex financial decisions of their lives.
Andrew Bailey, who now leads the Bank of England, told MPs that the situation was “ill prepared”.
Mr Bailey was in charge of the Financial Conduct Authority (FCA) as it dealt with some of the fallout for the poor advice given to many British Steel Pension Scheme members.
Around 8,000 workers, many from the Port Talbot steelwork, transferred away from the defined benefits British Steel pension, which provided a guaranteed income for life.
Financial advisers received generous fees after persuading workers, to switch to defined contribution schemes, where the income is dependent on stock market performance.
They were asked to consider transferring their pension away from the scheme after Tata Steel got into financial difficulty.
During a 2017 restructuring, members had to decide what to do with their money, and they only had a limited time to do so.
If they had more than £30,000 in their pot they were required to take financial advice. But much of this advice was bad.
Earlier this year the FCA set out a plan which it said will deliver £71.2 million worth of compensation to those who were misled about their pensions by financial advisers.
Close to half (46%) of all the advice the FCA reviewed turned out to be unsuitable.
“It was ill-prepared to put the members of the British Steel Pension Scheme in what was frankly a very difficult and slightly ‘gun to the head’ situation because of the state of the company to have to make the most complex financial decision that any of us could have to make in our lifetimes,” Mr Bailey told the Public Accounts Committee.
“It is inherently an extremely complex calculation.”
He hit back at allegations that the FCA had not done enough to protect the scheme members.
“Please don’t think the FCA was sitting on information not doing anything, that was not the case,” he said.
Last October Welsh MPs Stephen Kinnock and Nick Smith called for an investigation into the Financial Conduct Authority which they say failed to get to grips with the scandal.
Nick Smith, the MP for Blaenau Gwent, accused the FCA of “delay and failure to lead” and said, “thousands of steelworkers were given bad transfer advice and lost tens of thousands of pounds as a result.”
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