An independent review into the handling of the British Steel Pension Scheme (BSPS) scandal has highlighted some basic mistakes that put workers at risk.
The review was carried out by Caroline Rookes, ex-chief executive of the UK’s Money Advice Service and ex-director of private pensions at the Department for Work and Pensions (DWP).
The main findings saw both Tata Steel, which owns British Steel, and the regulators making somewhat basic mistakes, after steelworkers were told that the firm’s pension scheme was closing.
This resulted in scheme members being targeted and pressured by unregulated financial advisers into transferring their money into dubious investment schemes.
Scarce communication with members
A lack of communication and of supporting information “exacerbated the problems”, said Rookes in her report. This relates to communication between trustees and members, and between regulators as well.
In fact, trustees sent out two letters to Tata Steel members – one in May 2016 and one in January 2017 – trying to outline the issues and the developments of the pension scheme restructure. However, since the letters expressed that “no action was required” it sparked no concern or interest in the members.
Additionally, the concerns of the members were not answered adequately or they were given inconsistent responses, the report found.
“Inevitably this generated suspicion, concern and uncertainty. In addition, rumours and misinformation started to circulate to fill the vacuum.”
Regulators not sharing information
Similarly, the four public bodies involved – namely The Pension Regulator (TPR), the Financial Conduct Authority (FCA), the Pension Protection Fund (PPF) and the Single Financial Guidance Body (SFGB) – did not communicate or engage in sharing their information and findings while discussing with the scheme.
“Had the public bodies shared their concerns and had a dialogue beyond their strict legal remit they could have provided valuable help to the trustees,” said Rookes.
“By working with the trustees and each other earlier, the public bodies could have created an outline plan for helping the trustees to manage the risks, particularly those associated with cash transfers.”
The lack of communication and information available resulted in members being “unable to find out what the PPF would mean for them and, in the absence of information, feared the worst.”
“It was left to an independent financial adviser to provide additional support for those considering cash transfers. The idea was to help people understand their options and what the implications might be. This was not ‘advice’, and was based on clear guidance to the volunteers as to what they could and could not say. This was helpful but too late” the report found.
The regulators’ reaction
All public bodies have welcomed the independent report and have pledged to take Rookes’ recommendations on board. As a matter of fact, the FCA, TPR and the SFGB produced a joint protocol following the report that will see them sharing information and communicating more effectively with pension scheme trustees.
“We are already working closely together to provide an increased level of support to trustees and scheme members where there is uncertainty around the future of a DB pension scheme,” said the joint statement.
“We are also publishing a joint protocol to ensure we work in a co-ordinated way to support members of pension schemes. Our joint working also includes providing letters for trustees to send to members alerting them to the risks of transferring out of DB pension schemes and giving practical information. The letter has already been sent to 31 pension schemes.”
Views from the industry
Industry experts also welcomed the findings and the recommendations of the report, although criticised the parties involved for not being prompt and alert when handling the BSPS case.
Jon Greer, head of retirement policy at Quilter said: “The recommendations from the Rookes review on the handling of the British Steel Pension Scheme are so sensible, such as trustees providing a panel of trusted advisers and having clear and effective communication, that it is somewhat worrying that they weren’t implemented at the time.
“What is important is to take the lessons from the scenario and ensure these common sense solutions are implemented. It might not be long until there is another deluge of employees considering pension rights.”
Similarly, Steven Cameron, pensions director at Aegon, highlighted that no two restructures will be the same and that each case should be considered and assessed in isolation.
“It’s clear that some members of the British Steel Pension Scheme have suffered as a result of inadequate communications, rushed timescales or unsuitable advice, but it’s important to look at the issues in context to make sure industry, regulators and trustees learn how to protect members involved in future pension scheme restructures.
“No two restructures will be the same, [and] it makes absolute sense for trustees, whether as part of a restructure or as business as usual, to play a greater role in communicating with their members around transferring out.”