British Steel Pension Scheme: Transfers — [Mr George Howarth in the Chair]

Part of the debate – in Westminster Hall at 10:03 am on 10th April 2019.

Alert me about debates like this

Photo of Jack Dromey Jack Dromey Shadow Minister (Work and Pensions) (Pensions) 10:03 am, 10th April 2019

It is a pleasure to serve under your chairmanship, Mr Howarth. First, I congratulate my hon. Friend Nick Smith on securing the debate. I praise my hon. Friend Stephen Kinnock, who has played a major role in the drive for justice for those who were cheated on their pensions, the work of the APPG and the co-operation of colleagues from the SNP. I also welcome to her first Westminster Hall debate the newly elected Member for Newport West, my hon. Friend Ruth Jones, who will, I know, be a strong champion of the people of Newport West.

A good pension is about security and dignity in retirement. The people of Britain deserve nothing but security and dignity in retirement. People work hard, build our country and, when they come towards retirement, plan ahead for the holiday they had always dreamed of, or of helping their kids to be able to buy their own home. There can be nothing more painful than to be cheated out of what they have worked for all their lives.

I sometimes say I have been around since Churchill was a boy. I remember the era back in the 1970s and 1980s, when half the population of Britain was in good final salary DB schemes. We have made some progress—for example, the battle on auto-enrolment that we fought and won when Labour was in power, and which I welcome being carried forward by this Government—but to be frank, there has been a depressing direction of travel for good final salary schemes. There have been too many scandals, but none more scandalous than that of British Steel, and that is emblematic of the problem we face with the regulation of DB pension schemes in the UK.

As my hon. Friend the Member for Blaenau Gwent stated, when a deal was struck to keep Tata afloat, members belonging to the £15 billion British Steel pension fund were given the option to shift their assured benefits to the pension protection fund, to join a new retirement scheme backed by Tata, or to transfer to personal pension funds. That led to what was called a “feeding frenzy” at the site in Port Talbot, as dodgy introducers preyed on workers who were more than likely confused about the position of their pension, and who may not have had the financial support or education needed to make such an important decision. Some advice was available, but often it was simply not good enough, or it was technical and unintelligible. Those rogues, those introducers, should be utterly ashamed of themselves. They bought meals for workers in local pubs, and convinced them to transfer their pensions into totally unsuitable schemes. Some people could have lost up to six figures from their pension total.

The Financial Conduct Authority has been probing concerns that pension changes that involve 130,000 members of the Tata retirement fund appear to have been affected. A study of the 8,000 people who transferred their pension demonstrated that 58% received advice that was simply not suitable, and the Pensions Regulator calculated that in 2017, the average loss was £94,000.

I will never forget the heartbreaking story that I was told by the chief executive of the Pensions Advisory Service during the passage of the Financial Guidance and Claims Bill that introduced the Single Financial Guidance Body. The Pensions Advisory Service set up an advice facility on site, and one of the first people to come in was a big burly steelworker and shift supervisor. He sat down and burst into tears. It turned out that he had been duped by one of those introducers, and it had cost him tens of thousands of pounds. The main reason for his grief, however, was not what he had suffered and would endure for the rest of his life, but the fact that the 20 guys on his shift had all followed his lead. He said to the Pensions Advisory Service, “I’ll never, ever be able to forgive myself, because the mistake that I made has had catastrophic consequences for the people I’ve worked with for 10, 20 or 30 years”.

The British Steel case was central to our work during the Financial Guidance and Claims Bill, and I pay tribute to the work of my hon. Friends the Members for Blaenau Gwent and for Aberavon, and many other Members, particularly from Wales, who played a noble role in strengthening the legislation to crack down on the outrageous. Real progress was made. Cold calling more generally was central to the debate on the Bill, and the ban on pension cold calling was a significant step in the right direction. However, we must now go further and introduce a ban on all cold calling—there were constructive discussions about that, and it would helpful if the Minister would update us on the Government’s thinking—and we must also ban the work of introducers. From January this year there has been an end to pension cold calling, but more needs to be done.

More generally, the introduction of the Single Financial Guidance Body is a welcome step towards greater financial education and security. It brings together the three previous bodies, which all did good work, into a new, more effective body for the next stages. Crucially, it needs to be adequately resourced, not least because of the role that it will play in the oversight of the dashboard process, but it is welcome that it has been established.

Having said that, lessons need to be learned, and significant further progress must be made. On the learning of lessons, and the need for action, Frank Field, the Chair of the Work and Pensions Committee, said of the Committee’s findings earlier this year:

“British steelworkers were roundly failed by the official regulators meant to protect their life savings. They were given precious little to guide them through murky waters filled with scammers looking to snatch their pensions—scammers who had little to fear from the FCA’s grossly inadequate action at the time”,

which I think it now acknowledges. The right hon. Gentleman continued:

“Now it seems they are being sold short again on what even the FCA calls ‘rightly’
deserved compensation. The FCA has ridden to their defence and urged the FSCS to be more generous, but the FSCS is clinging to rules the FCA says needn’t apply.”

That is a powerful indictment of what happened, and a call for further action to be taken. That is essential because—I say this with some sadness—British Steel is not the only outrageous case of pension mishandling. We have seen too many other scandals, most notably BHS and Philip Green, who ought to be utterly ashamed of the way he has conducted himself over the years, and what happened with the collapse of Carillion, which I will never forget.

In my constituency, we had a first-class apprentice training centre that was operated by Carillion and that had 60 apprentices going through it at any one time. When Carillion collapsed on the Monday, they were told, “Don’t worry. You’ll be okay.” On the Tuesday, they all got called in and sent home at lunch time—a number of them in tears. One young man, who had suffered from autism but whose life had been moving forward in the right direction, was sobbing uncontrollably and saying, “What am I going to tell my mum?”

On the pensions issue, Carillion has been centre stage in our discussions, including with the Government, about the further steps that need to be taken. Some of the proposals in the DB White Paper are welcome, such as stronger criminal sanctions for directors neglecting pension schemes—although I will come on to the fact that the possibility of criminal action is there in the here and now—stronger powers for TPR, and clearer standards on scheme funding.