Day the pension vultures swooped on our steelworkers

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Taibach rubgy team’s clubhouse looks like it hasn’t been decorated since the Seventies. 

Chipped wooden tables and a plastic Christmas tree have been positioned around the bar and, apart from a bright cabinet displaying a collection of rugby jerseys worn by former Wales hooker and local hero Richard Hibbard, the room is poorly lit.

Sitting at a booth in the corner nearest the door are five men who look like ordinary punters having a lunchtime pint at their local. 

In fact, if it weren’t for the piles of paperwork strewn across the table in front of them, there would be no clues to the very serious business behind their meeting.

The paperwork shows that these five lifelong Port Talbot steelworkers, most of whom are in their late 50s, have given up the generous final salary pensions offered by their company, Tata.

Targets: Some Port Talbot steelworkers have received sums of up to £610,000 after cashing in their pensions 

Targets: Some Port Talbot steelworkers have received sums of up to £610,000 after cashing in their pensions 

In some cases, they have cashed in annual incomes worth more than £26,000 from the British Steel Pension Scheme.

In exchange, they have received sums of up to £610,000 — an astronomical figure for anyone, let alone someone from a small village outside Port Talbot in South Wales where the average house price is just £117,000.

It is a life-changing decision and some of the men are understandably excited by the prospect of being richer than they had ever dreamed. But as they share their stories, it starts to dawn on them that they may have made a grave mistake.

Money Mail has travelled to Taibach, in the shadow of the Port Talbot steelworks, to investigate allegations that thousands of workers are being badly advised by financial advisers who stand to gain a slice of their pension pots.

The five men who have agreed to meet us at the rugby club are among 130,000 members of the failing British Steel Pension Scheme who have been given until December 22 to make an incredibly difficult choice.

The pension scheme, which is struggling to cover payouts to retirees, is being rescued by the official pensions lifeboat fund and workers face losing some of the income they were expecting in old age.

Members have been told they can stay put after the scheme is taken over by the Pension Protection Fund and accept a possible 10 per cent cut in their retirement income, lower annual increases and have their payouts capped at a maximum of around £35,000 a year.

Alternatively, they can switch to a newer, but less generous version of the steel-workers’ pension scheme.

On its website, the British Steel Pension Scheme says most, but not all, steelworkers will be better off switching to the new plan.

Yet those who do nothing will automatically be moved into the Pension Protection Fund and lose some of their income. Any steelworker who is more than a year from their retirement age — typically 65 — has a final option that is proving hard to resist.

They can ditch their British Steel pension entirely and turn the income they were owed into a cash lump sum. This money must be transferred to another type of pension plan where it can be invested in shares, bonds or other assets.

For example, a 57-year-old steelworker entitled to around £10,000 a year at age 65 might be able to transfer around £310,000 into a stock market-linked plan.

The Port Talbot pension scheme is being rescued by the official pensions lifeboat fund and workers face losing some of the income they were expecting in old age

The Port Talbot pension scheme is being rescued by the official pensions lifeboat fund and workers face losing some of the income they were expecting in old age

The Port Talbot pension scheme is being rescued by the official pensions lifeboat fund and workers face losing some of the income they were expecting in old age

Back at the rugby club, all five steelworkers have chosen to cash in their pots. But after the initial euphoria of learning that they were sitting on a goldmine, they have been left terrified that they may end up with a fraction of the pension they expected to receive.

Both the City regulator and a committee of MPs are investigating concerns that steelworkers are being advised to put their lump sums into dangerous investment schemes where they risk losing money.

Evidence submitted to Frank Field MP, the chair of the Work and Pensions Committee, suggests that advisers are organising ‘chicken in a basket’ events where steelworkers are given free food and urged to transfer their final salary pensions to little-known investments.

In some cases, advisers are pocketing giant fees for a few hours’ work in recommending that scheme members switch into these plans.

These charges can be as much as 3 per cent, meaning that the adviser pockets £18,000 from a £600,000 transfer. 

The committee is concerned that some savers are making an irreversible mistake when they would be better off sticking with the guaranteed income from the steel pension scheme. 

It fears others are getting unclear advice and have no idea they’re putting their life savings into inappropriate investments.

Money Mail has agreed to change the names of the five steelworkers.

Brian Jones, who has come accompanied by his wife Margaret, said he thought he had ‘won the lottery’ when he realised they could get their hands on £500,961 if he transferred his pension out of the British Steel scheme.

The 58-year-old, who is recovering from knee replacement surgery, heard about the huge sums on offer for pension transfers from a colleague. Pension rules state that anyone transferring more than £30,000 out of a final salary scheme has to take financial advice from a qualified professional.

With so many steelworkers trying to figure out what to do with their pensions — and with a deadline approaching — many advisers in the Port Talbot area are fully booked.

But Brian’s colleague knew of a firm that could get him an appointment. He approached Celtic Wealth Management, who said they were not a financial advice firm but could put him in touch with a man called Darren Reynolds.

On its website, the British Steel Pension Scheme says most, but not all, steelworkers will be better off switching to the new plan

On its website, the British Steel Pension Scheme says most, but not all, steelworkers will be better off switching to the new plan

On its website, the British Steel Pension Scheme says most, but not all, steelworkers will be better off switching to the new plan

Mr Reynolds, a qualified financial adviser whose company, Active Wealth, is based in Willenhall, near Wolverhampton, made the 220-mile round trip to visit Brian and his wife and discuss their options.

It is unclear what Mr Reynolds may have been told during the interviews which may have influenced his advice. However, documents seen by Money Mail show that Brian received figures indicating he was due to get £25,859 a year when he retired at the age of 65.

If he gave that up, he would get more than half a million pounds. Brian was sure he wanted the cash and Mr Reynolds signed off the transfer. Documents show Brian was charged £1,500 for the advice.

Money Mail took a copy of the recommendation and showed it to Robert Reid, a highly-regarded pensions expert at consultancy firm Canscot Solutions. He was extremely critical.

Mr Reid says: ‘From what I have seen, this adviser starts off with the objective of moving the money. These people just think that they are getting a transfer and that is that — no other option is considered.

‘The figures and terms being quoted in the report don’t mean anything to most people and there is no explanation of the fund they are invested in and how it works.

‘Basically, you’re expecting someone who has taken no interest in their pension up until now to suddenly have a masters degree in finance. From the evidence I have seen here, I would not have told this person to transfer.’

Brian says he made it clear to Mr Reynolds that he wanted the money somewhere he had already heard of, such as his bank account or a large pension company such as Prudential or Standard Life. 

But, in fact, Brian’s money has been transferred out of the British Steel Pension Scheme and into a self-invested personal pension, or Sipp, run by a company called Momentum.

Inside this pension plan, the money has been invested in a portfolio of funds run by a company called Gallium Fund Solutions. A separate company called Vega Algorithms allows Brian to view these investments.

Brian says: ‘I don’t need my money put in investment to grow. I don’t even know who has got it at the moment. Is it Momentum? Gallium? Vega Algorithms?’

The investment fact sheet says £9 in every £10 of Brian’s money will be invested in bonds and the rest in the stock market. It also says there is no fund manager looking after the overall pot; where the cash is invested is decided by a computer programme.

The Man of Steel statue in  Port Talbot. With so many steelworkers trying to figure out what to do with their pensions  many financial advisers in the  area are fully booked

The Man of Steel statue in  Port Talbot. With so many steelworkers trying to figure out what to do with their pensions  many financial advisers in the  area are fully booked

The Man of Steel statue in Port Talbot. With so many steelworkers trying to figure out what to do with their pensions many financial advisers in the area are fully booked

Right at the end of Mr Reynolds’ advice recommendation for Brian there are seven lines which say: ‘Unit prices can fall as well as rise’, ‘past performance is not necessarily a guide to future performance’ and ‘you risk the loss of capital’.

Sitting in the booth of the clubhouse near the exit is Dai — or the ‘overtime king’, as Brian calls him, because of the long hours he works. Dai also contacted Celtic Wealth on the recommendation of colleagues.

If he stayed in the British Steel scheme until he reached the age of 65, he would be entitled to £18,000 a year. The 56-year-old decided to transfer out of the company pension scheme in October because he worried how his wife and two children would be cared for if anything happened to him.

Under the British Steel scheme, if he dies before his wife, she will get just £8,000 a year — less than half his entitlement.

After speaking to Mr Reynolds, Dai decided to transfer his money out the scheme and hope it would grow.

He moved his £440,000 pension pot into an Intelligent Money Sipp. Around £370,000 of this was transferred into the same investment as Brian was put into. Dai took the remaining £70,000 as cash to pay off his mortgage and clear other debts.

‘I wanted low-risk but now my biggest worry is that I’ll retire and I won’t have any money,’ says Dai.

Alastair Rush, a financial adviser who grew up in the Port Talbot area, believes Dai could have solved all his financial worries — without the risks of losing his pension — by taking out life insurance cover.

Mr Rush said: ‘If his wife outlives him for 30 years then there won’t be much left for her or the children anyway. If that is Dai’s main worry, then his adviser should be talking to him about life cover.

‘Protecting yourself for a £200,000-£300,000 lump sum will be as cheap as chips and more reliable than the uncertainty of the high cost and high risk of some funds within a Sipp.’

Mark Taylor, 56, was also adamant that he wanted to leave the British Steel Pension Scheme. He plans to retire in two years and has the biggest pension entitlement of the whole group — £26,000 at age 65. But, instead, he decided to transfer his £610,000 pot to a Momentum Sipp.

Mark, who plans to retire in 15 months having spent 40 years at Port Talbot steelworks, says he is ‘more than happy with’ the service he was given. But the City regulator has raised the alarm.

Last week, the Financial Conduct Authority stopped Mr Reynolds’ firm Active Wealth from taking on new pension transfer business from anyone, including steelworkers, and has sent staff to Port Talbot to investigate.

All five steelworkers who agreed to meet Money Mail had been put into the same investments via either a Momentum Sipp or an Intelligent Money Sipp — regardless of their age, health or financial needs.

The portfolio of funds the five steelworkers were enrolled in is described as ‘conservative’ in the paperwork that they were given.

This should mean that the fund is less badly affected by swings in the market. But Money Mail was unable to find any track record for its investment returns.

One of the group at the rugby club is 38 and has had his £200,000 pension pot moved into the same fund as his older colleagues — even though he’s got far longer to go until he draws his pension.

U sually, financial advisers recommend that workers in their 30s take on more risk than those in their late 50s because they can ride out the ups and downs in the market.

Mark makes it clear he would rather risk his pension than stick with the British Steel Pension Scheme. ‘I’ll be retiring in just over a year, when I’m 58, and to get my full pension I need to stay on until I’m 65 — and there’s no way I can keep working that long.’ he says.

‘Even if I do get a full pension, when I’m gone my dependents get only a small amount and the rest goes back into the kitty — there’s no way that is happening. That’s why I pulled out of the scheme.’

Mr Rush believes none of the steelworkers has made the right move, based on the information he has seen and their testimonies at the meeting at the rugby club.

He says: ‘We spoke to people who didn’t need to transfer and who shouldn’t have gone into those particular funds.

‘I would say only 5 to 10 per cent of people should ever transfer out of final salary schemes — and only when it’s clearly the right option.’

Mr Reid, of Canscot Solutions, adds: ‘If you’re in a final salary scheme then you’re covered by the Pension Protection Fund if your employer goes bust. If you transfer out, you lose that protection.

‘You’re also at the mercy of stock markets, so you could end up losing a big chunk of your pension if your investments don’t perform well.

‘Basically, you’re swapping a large degree of certainty for chance.’

Mr Reynolds did not respond to Money Mail’s request for comment.

Celtic Wealth says: ‘Celtic’s role is to act as an introducer. It does not, in any way, influence the client’s decision to proceed with the transfer. The assessment of the client’s retirement needs and the development of an appropriate solution to meet those needs, as well as the delivery of all regulated advice, is entirely restricted to Active Wealth in its capacity as an authorised firm.’

A spokesman for Gallium and Vega says: ‘In the advice process, the adviser and the selected Sipp operator effect the transfer of the pension. We are made aware of the client after the transfer is made. Gallium and Vega have no part in the transfer or advice process.’

Momentum says it has written to 110 steelworkers asking them to review their transfer requests.

p.thomas@dailymail.co.uk

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