More than 1,000 pensioners will get £49million in compensation after getting bad advice to transfer out of their British Steel retirement schemes.
The average pensioner will get around £45,000 under plans confirmed by the Financial Conduct Authority (FCA) regulator today.
Many British Steel pensioners lost up to £489,000 in life savings after getting duff financial advice to take money out of their defined benefit pensions.
The thousands of steelworkers, mainly from South Wales, transferred a total of around £2.8billion from the British Steel scheme after Tata Steel took over their pension liabilities in 2017.
But many lost money as a result.
The FCA has told the companies that gave the bad advice to do reviews and pay out money for any losses they caused.
FCA executive director for consumers and competition Sheldon Mills said: “We found that almost half the advice given to members was unsuitable – an exceptionally high level compared with other cases.
“We will be watching advisers closely and have put in place checks so that consumers can have confidence that they’re being treated fairly under the scheme.”
The FCA is making a tool that firms will have to use to calculate redress payments.
Affected British Steel pensioners should be contacted by their financial adviser between February 28 and March 28, 2023.
All the pensions advice should be reviewed by the end of September 2023.
These retirees will have the choice of getting their redress payments as cash or as a top-up to their pension.
If they choose cash, pensioners should know how much they’ll get back by December 2023.
If they pick a pension top-up instead, they will know their compensation payment by February 2024.
Customers of firms that are no longer trading should make a claim with the Financial Services Compensation Scheme (FSCS).
AJ Bell head of retirement policy Tom Selby said: “Today’s news will undoubtedly come as a huge relief for those affected by the British Steel pension saga and brings those who received bad advice a step closer to receiving redress.
“Anyone who was misadvised to transfer out of their defined benefit British Steel pension scheme now has certainty over how the plan to pay their money back will work and when they should get their redress.”
But these British Steel pensioners will be getting £20million less than the FCA first suggested.
Mr Selby said: “This is partly because fewer people are now expected to receive redress and partly because annuity rates, used to determine the value of the payout, have improved substantially in 2022.”
As a result, the estimated average redress payment has fallen from £60,000 to £45,000.