From British Steel to Sony, the pensions transfer timebomb laying waste to communities

Industrial plants, where large groups of workers are easier to target by unscrupulous advisers, appear to have been the worst affected, she says. But she has clients from white-collar pension schemes such as Sony and Trinity Mirror, too. Welsh Water employees are also on her books.

“Unless you’re dying,” she says, “for the vast majority of people under the age of 50, opting out of a defined-benefit scheme is never the right option.”

She says the system is skewed so the advisers get paid more if they get you to opt out than stay put. “The temptation seems to have just been too great.”

The Financial Conduct Authority reckons the amount of mis-sold defined-benefit transfers to be more like £20 billion rather than Hann’s £40 billion estimate, but even so, putting it right is proving impossible.

The Financial Services Compensation Scheme caps compensation at £50,000 or £85,000, barely scratching the surface on many claims. So victims end up suing the companies instead.

But there they run into difficulties, too.

First off, they can’t claim six years after the mis-sell, and many won’t realise they are worst off until it is too late.

Then, they may face another problem.

Lawyers are covered by insurance for their past advice. Victims can claim against it for compensation. But, says Hann, IFAs’ insurance can exclude previous years’ activities. Of the 42 she is pursuing for clients, only one has full professional indemnity cover.

That firm is Quilter, the stock market-quoted company which got entangled in the British Steel mess when it bought IFA group Lighthouse last year.

Lighthouse was invited in to British Steel’s Scunthorpe administrative offices by the workers’ union, Unite. Its advisers were even given office space in the works’ administrative building. There, according to Al Rush, an IFA now advising workers how to get their affairs back in order, “they were just transferred en masse. Eight, nine, 10 people, in and out, one after the other.”

As the publicity over Lighthouse’s alleged role gathers pace, the British Steel scandal poses a reputational risk for its new owners.

About 300 British Steel employees were advised to transfer out by Lighthouse. An employee has been suspended pending investigation.

Quilter said: “We are aware of the concerns surrounding British Steel pension transfer advice, including that provided to these members by Lighthouse prior to its acquisition by Quilter in 2019. We are in the process of reviewing each of these cases.”

Those advised through Quilter stand a chance of redress. Others less so. Several companies have merely declared themselves bankrupt, leaving victims hanging.

In Scunthorpe, Andy, his son and his son-in-law all work at the British Steel plant. His son-in-law was laid off on Monday.

The government wants to “level up” towns like this.

It should start with a thorough pensions review to make people financially whole again.

What is a defined benefit pension?

Defined-benefit pension schemes are the Rolls-Royce of retirement savings.

Companies usually contribute generously every month, alongside the employee, and guarantee an income on retirement based on the salary and length of service. Most have been closed, with employees like British Steel’s Andy Willerton offered the chance to transfer out.

For the majority of people, it is better to keep the money with the old scheme, but over a three-year period, the FCA found IFAs recommended transfers in 69% of 234,951 cases.

Deadline looming

Those who have been missold a pension transfer have until six years to make a legal claim for redress against the company.

It can take months of legal preamble to get to the stage of lodging a claim in court, so in reality, the deadline is more like five years from the time the bad advice was given.

This is one reason why the British Steel issue is high profile now - the mis-selling appears to have been at its peak in 2016 and 2017.

If an adviser voluntarily notifies clients that it may have given bad advice, the clock is accelerated to just three years to claim.

Many people do not even realise they would have been better off remaining in the company fund, so lawyer Hann has urged the Financial Conduct Authority proactively to get out into the British Steel communities to warn employees to get help checking the advice they got before it is too late.