The report, which is based on the committee's ongoing inquiry into pension freedoms, says MPs have seen ‘worrying evidence’ that BSPS members have, over the past year, been exploited for cynical personal gain by dubious financial advisers in tandem with ‘parasitical so-called "introducers"’.  

From March 2017 until now, the scheme has processed 2,600 pension transfers equating to a total value of £1.1bn, according to data revealed on the 8 February by the scheme trustees. The average value of BSPS pension benefits transferred out was £400,000.

In around 20 cases the transfer value exceeded £1m. The committee heard of advice fees typically around 2% of the transfer value, while the receiving funds sometimes imposed high annual charges and 'punitive' exit penalties ranging from 5% to as high as 10%.

Frank Field, chair of the committee, said: ‘Our financial services regulator has been rejigged and rebranded but I can’t see much evidence of it working better for the people it is meant to protect: individuals making life-changing financial decisions. To propose, as the FCA did in July last year, abandoning the advisor presumption against transferring out of a gold-plated, stable, indexed pension scheme: it really makes you wonder whose side they're on.

‘Once again we find The Pensions Regulator (TPR) fiddling while Rome burns, when it should have seen this rip-off coming. Given a choice between two defined benefit options worse that what they had been promised, with precious little support in making that choice, many steelworkers were drawn to the superficially attractive third option.

‘This is the first deal like this, but there will be more. All the responsible authorities must act, now, to stop more people being cheated.’

In its report, the committee recommended the FCA bans contingent charging, which it said is a key driver of poor advice.

It also wants the regulator to create an online register of advisers and their current status in providing advice that does not require ‘a degree and orienteering skills’ to use. MPs warn that the FCA should not - as proposed in their 2017 consultation - drop the requirement on advisers to start from the presumption that a DB transfer is a bad idea for their client.

Recommendations for the TPR are to conduct a review, listening to BSPS members and learning the lessons of how they were let down, to ensure all schemes in future are equipped to give members of full picture of the options they are choosing between.

The committee also called on government to bring forward proposals for a system of deemed consent in the long awaited white paper on DB pension schemes. This should enable the bulk transfer of members from a DB scheme, certain to enter the PPF, into an alternative scheme providing unequivocally better benefits than the PPF to those members. Such a system would have been of benefit to many of the 25,000 BSPS members who did not respond to the scheme consultation, and who may have been entered into an option which was less advantageous for them.

The report notes: ‘Since the committee's inquiries into BSPS began, the FCA has gradually picked off firms providing unsuitable advice to BSPS members, and announced a review of all UK firms providing DB transfer advice. This is welcome, but too late for BSPS members.’ 

British Steel Pension Scheme report is here.

Report by Pat Sweet