He said: “In my experience [this] is usually the case for 5 or 10 per cent [of members of a pension scheme].”
Apart from these, and in the case of British Steel, “there are also members with a higher value of pre-1997 pensionable service, who are the ones that lose most as pension benefits will not increase when in payment,” Mr Neagu explained.
According to estimates, the switch from retail price index (RPI) indexation in the old BSPS to the statutory minimums offered by the new scheme could result in a 60-year-old scheme member with all their service pre-1997 losing around 40 per cent of their pension.
Mr Neagu added: “But even those, not all of them should transfer. Even though their pre-1997 excess over guaranteed minimum pension (GMP) pension will not increase in payment, the new BSPS is still a very valuable pension, and part of their pension is post-1997 which will increase with inflation.”
These members also have the GMP for being contracted out of the second state pension, which means that some of the pension payments will increase with inflation, he said.
Mr Neagu also warned that British Steel members are being approached by financial advisers on a contingency basis.
This means that there “is no fee for the pension transfer report, and [these firms are] only charging a percentage on implementation, which creates a bias,” he warned.
Mr Neagu also warned that an increase of transfer requests might not be restricted to the British Steel scheme.
He said: “Current events could easily become contagious to affect other defined benefit pension scheme with similarly weak covenants.”
Montfort will be providing advice to two scheme members living in the US, Mr Neagu said.
The firm is expecting further complexities arising in these cases due to the fact that these are emigrant members.
maria.espadinha@ft.com
