Thousands of steelworkers were the victims of pension regulation failures that left some with losses of up to £489,000, an official report has found, prompting accusations that the UK financial watchdog was “asleep at the wheel”. The National Audit Office’s findings relate to a 2017 scandal involving members of the British Steel pension scheme, many of whom were persuaded to transfer their retirement savings by advisers who then pocketed huge fees. The NAO, the government’s public spending watchdog, said some of those who transferred the cash to a different provider “have suffered significant financial losses because they were provided with unsuitable advice … and they have not been compensated fully”. It said “the regulated financial advice market failed to protect them”. The Financial Conduct Authority was, and still is, the relevant watchdog. That prompted Dame Meg Hillier, chair of the public accounts committee, to say the case “was a failure from top to bottom … The FCA, whose job it is to regulate these firms, was asleep at the wheel”. The FCA has come under fire in the recent past over its mishandling of an another investment scandal involving London Capital & Finance, a firm that collapsed in 2019, leaving many individuals nursing big losses. The British Steel pension plan was a large “defined benefit” scheme with about 130,000 members which was restructured in 2017 after British Steel’s then-owner Tata Steel experienced financial difficulties. At the time, members typically had to decide between two options for managing their pension benefits, though about 44,000 members – typically non-pensioners more than a year away from retirement age – also had a third option: they could “transfer out”, which meant taking their pension elsewhere. Approximately 7,834 members – representing £2.8bn of the fund – chose to move their cash. But, the NAO said, many of these people were “particularly vulnerable to pension advice mis-selling”. Many had limited experience of making decisions about complex financial products, and there were huge sums at stake: the average transfer value was £365,000, but some individuals had pension pots worth more than £1m. In December 2017 the Guardian reported that the scheme shake-up had triggered a “feeding frenzy” among certain financial advisers. At a parliamentary hearing that month, MPs forced the FCA to name and shame three firms they said were “ripping people off”. The NAO report said that, according to the regulator, the financial advice provided to individuals was unsuitable in 47% of cases. Some may have been persuaded to put their cash into inappropriate investments. Gareth Davies, the head of the NAO, said: “It is clear that many people have not been compensated fully under current arrangements.” For example, 263 scheme members have lost out on a total of £18m of redress to date because the financial advisers they used have gone into liquidation, and there are limits to the official compensation that can be awarded. The average loss for British Steel pension scheme claims resolved by the UK’s Financial Services Compensation Scheme – the official rescue fund for customers of failed firms – is £82,600, with individual losses ranging from zero to £489,000. But the compensation relating to advice firms that went out of business after April 2019 is capped at £85,000. In the coming days the FCA will give more information about whether, and how, it will implement a consumer redress scheme for those affected, where all firms involved would have to review their advice and potentially offer compensation. In a statement the FCA said it welcomed the report, “which highlights the complex issues for government and regulators which arose from the exceptional circumstances around [this case] and the framework for pension freedoms”. It added: “We recognise the harm these circumstances caused to steelworkers and communities.”