Scammers target steelworkers

The Financial Conduct Authority (FCA) is looking into claims that rogue pension advisers are aggressively targeting steelworkers at Tata UK's plant in Port Talbot. Unscrupulous advisers may be targeting as many as 130,000 people, after widespread publicity about a deal to restructure their £15bn pension fund.

Members of the British Steel Pension Scheme fund are currently deciding whether to shift their guaranteed pension benefits into the Pension Protection Fund, the industry's lifeboat scheme, or to move their money to a new scheme backed by Tata, under a deal agreed with the Pensions Regulator earlier this year to help ease the steelmaker's financial difficulties.

However, with both options offering reduced pension benefits, advisers have swooped on the steelworkers, in many cases seeking to persuade them to transfer their money to alternative arrangements. While these transfers may enable the steelworkers to access their savings more easily, they invariably carry high costs and almost always involve schemes that carry much greater levels of risk.

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Rogue advisers are reportedly presenting a transfer as the best option for almost all those affected, despite regulators repeatedly warning that most people with defined-benefit pension benefits (where retirement income is guaranteed at a certain level) would be better off keeping them. MPs in the area have also complained about the prevalence of poor advice, amid reports of workers being targeted with marketing leaflets pushing the case for a transfer, and transfer seminars offering free food and drink. The British Steel Pension Scheme itself says it has completed 1,700 transfers in recent months.

The FCA has said that its staff will travel to South Wales in the coming weeks to remind local advisers of their responsibilities. But the scandal is likely to increase pressure for greater support for the steelworkers. Trade unions and MPs believe perhaps predictably that the government should have done more to ensure pension scheme members had access to impartial advice on their options, and have been calling for members to be offered free independent financial advice now.

How to spot a fraud

The pensions freedom reforms sparked a feeding frenzy for pension fraudsters. However, there are things you can do to protect yourself.

Never respond to any cold call, text message or email from an individual or firm claiming to want to offer you financial advice on your pension savings. Take advantage of the government-backed Pension Wise scheme, which offers free guidance to defined-contribution pension-scheme members on their options. But make sure that you're dealing with the legitimate government scheme, rather than any duplicitous firms using similar names.

Any investment that sounds too good to be true almost certainly is be wary of language such as "one-off investment opportunity"; "free pension review"; "legal loopholes", or "government endorsement"; dismiss any offer that requires you to respond quickly.

Finally, if you suspect you're being targeted by a scam, the Pensions Advisory Service offers a free tool on its website that can help you decide. The FCA also maintains a register of known scams at FCA.org.uk/scamsmart (though don't assume the fact that a firm is not listed means that it is legitimate).

A nudge from Nationwide

The auto-enrolment pensions system is regarded as a major success for those who believe in behavioural finance initiatives but could the private sector be doing more to learn from this government exercise in "nudge" theory? The experience of Nationwide's occupational pension scheme suggests so.

The building society has taken a similar approach to auto-enrolment with its own pension plan. For years, its scheme required members to pay in 4% of salary in return for a 9% employer's contribution, but in addition, it offered to match extra contributions from members prepared to pay 7%; then, two years ago, it switched this deal around, automatically subtracting 7% from members and matching their contribution, but enabling members to scale back to 4% if they opted to do so.

The results have been dramatic. Under the old system, only 9% of members bothered to pay the extra, thereby missing out on the additional employer contributions, reports The Guardian. Today, 84% are paying the 7% only 16% have reduced what they pay.

It's another example of "nudge" theory that giving people a gentle push in the right direction works better than beseeching them to change their behaviour. For Nationwide members this has worked very well two-thirds of staff are now on target for a decent retirement income, according to the building society's forecasts.

Tax tip of the week

People using a help-to-buy Isa and who aren't on the brink of buying a house have four months to take advantage of a loophole that provides a potential £1,100 boost to Isa savings, reports The Daily Telegraph. The maximum you can put into a lifetime Isa (Lisa) is £4,000 a year, including any transfers. But money from help-to-buy Isa can be transferred to a Lisa up until the end of the 2017/2018 tax year, without counting towards the limit.

So if you'd put £4,400 into a help-to-buy Isa before April 2017, and transfer this to a Lisa before April 2018, you won't use any of your allowance for the year. As a result, you would then get the 25% government bonus on £8,400, rather than on £4,000.