British MPs criticise Tata Steel, regulators over pensions mis-selling scandal

Vidya Ram LONDON | Updated on February 15, 2018


A committee of MPs in Britain have criticised Tata Steel UK, the UK government and the financial services and pensions regulator and others over a pensions mis-selling scandal that led to members of the British Steel Pension Scheme being “exploited for cynical personal gain.”

The report relates to concerns around the financial advice provided to members of the pension scheme by pensions advisory firms. Last year an agreement was struck with UK pension authorities, following much negotiation, and the payment of half-a-billion pounds and an equity stake, which will separate the £15-billion British Steel Pension Scheme from Tata Steel UK, improving the company’s economic viability.

Concerns began to swiftly mount over the advice given to members by pension advisory firms on whether to remain with the existing scheme (which will enter the Pension Protection Fund, the government scheme that covers members of pension scheme that fall into insolvency), or transfer to a new defined contribution scheme being set up by Tata Steel or transfer into a third party scheme.

“Many BSPS members were shamelessly bamboozled into signing up to ongoing adviser fees and unsuitable funds characterised by high investment risk, high management charges and punitive exit fees,” said the report by the House of Commons Work and Pensions Committee published on Thursday. It warned of another “major mis-selling scandal,” as it pointed to a catalogue of failures that “created perfect conditions for vultures to take advantage.”

The report criticised the UK financial services regulator the FCA for the length of time it took to begin investigating the matter, but also reserved its criticism for the handling of the situation by Tata Steel. “The outlines of a deal to save the sponsoring employer of the BSPS, Tata Steel UK, have been in place since May 2017. The scheme’s members were apparently neglected by the signatories: the company, the Government and the pensions regulator…. Many members had lost trust in the sponsor company and its pension pledges. The scheme was under-resourced and unable to provide basic facts to inform a complex choice. A member communication plan proved woefully inadequate.”

However, it concluded that no changes should be made to the deal to save Tata Steel UK, which had been carefully constructed to a tight timetable. “it is vital that it proceeds…. the Government should, however, draw on the BSPS experience and ensure that an adequate legislative framework is in place for similar future deals.”

Last month Britain’s financial regulator, the Financial Conduct Authority said it was looking  into concerns expressed by members of the BSPS about the suitability of the advice they received. A number of firms have stopped advising pension scheme members following the FCA investigation. It also emerged that around 25,000 of the 122,000 members of pension scheme, which closed to new accruals in March last year, did not return their option forms, triggering criticisms from unions about the handling of the situation.


“The consultation process was a major undertaking involving complex financial detail and more than 120,000 people,” said a spokesperson for Tata Steel. “The Trustee supported members through the consultation process with personal information packs, 41 roadshows across the country and a free helpline service. We were pleased so many BSPS members made a positive choice to select the best scheme for their future and were pleased the Regulatory Apportionment Arrangement process in this case was able to offer all members the choice between the PPF and an alternative scheme. We were also pleased to note the Trustee expects the new scheme to pass the agreed qualifying conditions to go forward. Although much work is still needed to deliver a secure future in our UK business, the progress with pensions is welcome"

Published on February 15, 2018

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