British Steel savers targeted by pension sharks get free and impartial new helpline as crunch date looms
A deadline for British Steel pension members to make a crunch decision about their retirement savings is looming on 22 December - extended from the original 11 December - as fears are raised about rogue advisers trying to loot their pots.
Watchdogs say they are 'aware of reports' that British Steel savers are being targeted, and are visiting areas around company sites 'to remind advisers of our expectations of them'.
At the same time, a free dedicated helpline at 0207 932 9522 has been set up by The Pensions Advisory Service to assist scheme members, many of whom are understood to have taken no action as yet.
Decision time: British Steel workers face an important choice about what to do with their pensions
Those who want to transfer funds worth ￡30,000-plus out of the British Steel Pension Scheme have to pay for compulsory financial advice.
But TPAS will also provide impartial guidance at no cost to current and former British Steel workers.
'The Financial Conduct Authority are aware of reports that some advisers and unregulated introducers have been targeting British Scheme Pension Scheme members and providing unsuitable advice on transferring their pension from their defined benefit scheme,' said a spokesperson for the watchdog.
'It is important for scheme members to get appropriate guidance and regulated advice before making any decision.
'If anyone has transferred their pension and is concerned about the advice they have received or worry they might have been scammed, they should contact the Financial Ombudsman Service and look at the FCA’s ScamSmart webpages.'
This is Money's pensions columnist and former Pensions Minister Steve Webb recently answered a question from a British Steel scheme member, laying out all the options and urging people to seek independent assistance on their personal situation.?
I am a member of the British Steel Pension Scheme and have been receiving my pension on the 'high/low' arrangement since 2007. I am 61 years old.
Due to the current situation can I transfer out of the scheme into a private pension and if so how can I instigate this before the deadline?
SCROLL DOWN TO FIND OUT HOW TO ASK?YOUR PENSION QUESTION????????
Steve Webb replies: Members of the British Steel Pension Scheme (BSPS) are facing a tricky choice about what to do with their pension.
I would strongly recommend that members faced with this choice take impartial financial advice and also that they shop around for that advice as there are reports of some scheme members being charged very large amounts.
In this short article I hope I can explain the main issues as well as dealing with your specific situation. More detail on the options available can be found on the scheme’s website here.
HOW DOES THE PPF WORK?
We explain what happens if your pension ends up in the lifeboat scheme here.
In brief, members of the BSPS have three choices.
The first is to do nothing and remain in the BSPS scheme. It is expected that this will in time be taken on by the Pension Protection Fund (PPF), the ‘lifeboat’ arrangement for workers whose employers go out of business leaving a shortfall in the pension fund.
Broadly speaking, the PPF will pay 100 per cent of scheme pensions for those over pension age, and 90 per cent for those under pension age, with a cap for the very largest pensions.
The cap is ￡38,505.61, which works out at ￡34,655.05 after the 90 per cent level is applied. It is increased for those with more than 20 years of service.
In future years, the way in which pensions are increased to take account of inflation will generally be less generous in the PPF than it would have been in the BSPS.
On the other hand, those wanting to take a quarter of their pension as a tax-free lump sum may find that they get a bigger lump sum from the PPF than they would have done in the BSPS.
The second option is to transfer into the newly-created BSPS2 scheme. The benefits in this scheme will in some respects be less generous than those in the BSPS.
Steve Webb: Find out how to ask the former Pensions Minister a question about your retirement savings in the box below
For example, inflation increases will be lower than under the old scheme. But the intention is to remain outside the scope of the Pension Protection Fund and to pay benefits greater than those available under the PPF.
Members have until 22 December to decide whether they want to take this route.
A third option is to transfer your final salary pension out altogether, in return for a lump sum. You can stay in the current scheme for now and do this later, but it must be before the BSPS goes into the Pension Protection Fund, so you still need to move quickly.
You are barred from transferring out if you are old enough to be within a year of the scheme's retirement age?or already over pension age, which I go into in more detail below.
On the face of it, transferring out would seem like an attractive option, and many steel workers have been offered transfer values running into many hundreds of thousands of pounds.
But workers should be very careful about these eye-catching figures and listen carefully to impartial advice before deciding what to do.
Giving up a final salary pension means giving up a pension that is guaranteed regardless of the ups and downs of the stock market and regardless of how long you live.
It also provides a measure of protection against inflation. These are valuable guarantees and should not be given up lightly.
Final salary schemes also typically provide death benefits for a spouse of up to half of your pension income for the rest of their life. However, transferring out could mean your heirs inherit whatever is left over in your pot when you die, and this could be a bigger sum and could benefit other loved ones besides your spouse.
STEVE WEBB ANSWERS YOUR PENSION QUESTIONS
Anyone with a spouse who is considering transferring out of a final salary pension should consult them, and take their views on this issue into account.
Some spouses might prefer to inherit a guaranteed final salary income for life, rather than a pension invested in an income drawdown portfolio that is exposed to financial market risk. But transferring out will allow others to inherit in addition to your spouse, which you might also want to take into consideration.
I have tried to summarise the pros and cons of transferring out of company pensions in a balanced way in a guide which you can find here.
Turning to your specific situation, the option of transferring out your pension is not available to those who have already started to draw a pension from the BSPS, or are one year or less away from the scheme's retirement age.
That means you will have to choose between the first and second options outlined above.
In your case, you are on the special ‘high/low’ arrangement which pays a higher pension up to state pension age and a lower one thereafter.
The Government is considering changing the way that the PPF treats those with such pensions. Under current rules you would get your high pension from the PPF not just up to pension age but for the rest of your retirement – there would be no step down.
But the Government is considering changing the rules so that the PPF treatment would not be so generous, and doing so in time to affect British Steel retirees like you. The BSPS will be writing to anyone affected by this, and you can read more about it here.
In summary, this is a difficult choice for thousands of steel workers to make, and time is running out before one option is closed off to you.
It is vitally important to talk to someone impartial about your individual circumstances, your objectives and your needs, and to pay careful heed to the advice that you are given.
ASK STEVE WEBB A PENSION QUESTION?
Former Pensions Minister Steve Webb is This Is Money's Agony Uncle.
He is ready to answer your questions, whether you are still saving, in the process of stopping work, or juggling your finances in retirement.
Since leaving the Department of Work and Pensions after the May 2015 election, Steve has joined pension firm Royal London as director of policy.
If you would like to ask Steve a question about pensions, please email him at?[email protected]
Steve will do his best to reply to your message in a forthcoming column, but he won't be able to answer everyone or correspond privately with readers.?Nothing in his replies constitutes regulated financial advice. Published questions are sometimes edited for brevity or other reasons.
Please include a daytime contact number with your message - this will be kept confidential and not used for marketing purposes.
If Steve is unable to answer your question, you can also contact The Pensions Advisory Service, a Government-backed organisation which gives free help to the public. TPAS can be found here and its number is 0300 123 1047.?
Steve receives many questions about state pension forecasts and COPE – the Contracted Out Pension Equivalent. If you are writing to Steve on this topic, he responds to a typical reader question here. It includes links to Steve’s several earlier columns about state pension forecasts and contracting out, which might be helpful.?
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