UK steelworkers face lower payout from pension mis-selling scandal

The payout from a pension scandal involving more than 1,000 UK steelworkers is expected to be tens of millions of pounds lower than initially forecast as moves in financial markets helped lower the bill for insurers.

The financial watchdog on Monday put the bill to compensate workers after a British Steel Pension Scheme mis-selling scandal at about £49mn, lower than its estimates from March of £71mn.

For steelworkers, this means the average redress payout will be about £45,000, not £60,000 as estimated eight months ago.

The drop in payout was because the amount of money needed to fund compensation has fallen since the Financial Conduct Authority first published its proposals for a redress scheme for the more than 1,000 steelworkers who had been wrongly advised to swap final salary pensions for a cash lump sum.

The compensation is calculated on the basis of annuity rates, which have improved significantly since the start of the year.

The FCA said that, while it had been consulting on its redress package, it had noted a number of companies removing a “substantial amount” of assets.

The BSPS scandal, one of the worst of its kind in the UK, dates back to 2017 and 2018 when 7,700 members of the plan transferred their guaranteed retirement benefits, worth £2.8bn in total, to riskier arrangements, following a restructuring prompted by Tata Steel, the sponsoring employer.

The FCA found that up to 54 per cent of transfer recommendations made by financial advisers to BSPS members were unsuitable, exposing the consumers to losses in retirement income.

The FCA in March outlined proposals to use rarely invoked powers to force 340 businesses to review pension transfer recommendations given to about 4,000 BSPS members between May 2016 and March 2018.