By Huw Jones
LONDON (Reuters) -Financial advisers will have to compensate many former members of British Steel's pension fund an average of 45,000 pounds ($54,418) each for wrongly advising them to move their retirement savings, Britain's financial watchdog said on Monday.
After the closure of a Tata Steel UK pension scheme, a legacy from previous owner British Steel, steelworkers could choose by December 2017 between moving to a new company scheme or joining a lifeboat known as the Pension Protection Fund (PPF).
But many were advised to take out their money completely and move it into pension schemes which offered no guaranteed income, thus generating bigger fees for advisers.
"We found that almost half the advice given to members was unsuitable – an exceptionally high level compared with other cases," Sheldon Mills, executive director for consumers and competition at the Financial Conduct Authority, 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.
Redress is calculated based on the money needed to top up a personal pension to provide an income similar to what would have been received by staying in the British Steel pension.
PIMFA, which represents financial advisers, said it was regrettable the FCA had not addressed valid concerns already raised by industry.
"We also continue to retain concerns that the total cost of the scheme...will be significantly higher than set out in the FCA’s revised cost benefit analysis," PIMFA said.
Some steelworkers have already received compensation under the separate UK financial services compensation scheme.
A critical report from UK lawmakers in February 2018 said the FCA had been too slow to prevent "vulture" financial advisers from ripping off steelworkers, some of whom have already been compensated, over their 14-billion-pound pension pot.
About 7,800 steelworkers lost an average 82,600 pounds in life savings by transferring out of their defined benefit pension, the report found.
It said steelworkers were shamelessly bamboozled by dubious financial advisers in tandem with unregulated, parasitical introducers who wooed clients with sausage and chips lunches in return for a share in the fee.
The case shone a light on poor practices in pensions more generally, and the FCA said it has opened investigations into 30 firms regarding advice.
($1 = 0.8269 pounds)