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LONDON, Nov 28 (Reuters) – Financial advisers must pay an average of 45,000 pounds ($54,418) each for wrongly advising several former members of British Steel’s pension fund to move their retirement savings, Britain’s financial watchdog said on Monday.
Following the closure of the Tata Steel UK pension scheme, a legacy of previous owner British Steel, steelworkers will be able to choose between moving to a new company scheme or joining a lifeboat known as the Pension Protection Fund (PPF) by December 2017.
But many were advised to pull out their money entirely and move it into a pension scheme with no guaranteed income, thus incurring huge fees for advisers.
“We found that almost half of the advice given to members was inappropriate – an exceptionally high level compared to other cases,” Sheldon Mills, the Financial Conduct Authority’s executive director for consumers and competition, said in a statement.
Financial advisers must compensate those affected by February 2024, with more than 1,000 steelworkers expected to receive an average of 45,000 pounds ($54,418), the FCA statement said.
The abatement is calculated based on the money needed to increase the individual pension to provide an income similar to what would have been received while on the British Steel pension.
PIMFA, which represents financial advisers, said it was regrettable that the FCA had not addressed valid concerns already raised by the industry.
“We also retain concerns that the total cost of the scheme…will be significantly higher than that determined in the FCA’s revised cost benefit analysis,” PIMFA said.
Some steelworkers have already received compensation under a separate UK Financial Services Compensation Scheme.
A critical report by UK lawmakers in February 2018 said the FCA was too slow to prevent “vulture” financial advisers from ripping off steelworkers, some of whom have already been compensated for their 14-billion-pound pension pot.
About 7,800 steelworkers lost an average of £82,600 in life savings by transferring from their defined benefit pension, the report found.
It said steelworkers were shamelessly goaded by unruly, parasitical introducers by dubious financial advisers who lured clients with sausage and chips lunches in exchange for a share of the fees.
The case highlights poor practices in pensions generally, and the FCA said it had opened investigations into 30 firms over the advice.
($1 = 0.8269 pounds)
Reporting by Hugh Jones Editing by David Goodman, Philippa Fletcher and Mark Heinrich
Our Standards: The Thomson Reuters Trust Principles.
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