Wealth manager Quilter should have seen the British Steel pensions scandal a mile off

Financial advice group Quilter says it had no idea when it bought the Lighthouse group last year that it was letting itself in for a flood of mis-selling claims.

I can’t see why.

There had been dark whispers about Lighthouse advisers greedily mis-selling British Steel workers to transfer out of their generous company defined benefit pensions for years.

All Quilter needed to do was pick up the phone to folk in Port Talbot and Scunthorpe to get a view.

Had they done so, they could have come across men like Andy Willerton , a tough, proud steelworker of 30 years’ standing, left hundreds of thousands out of pocket after being advised to quit the BS scheme for an expensive, poor-performing private pension plan.

The fees he now pays alone cost him more than the money he was hoping to draw down when he retired.

Dozens more would have come forward, too, if Quilter’s due diligence team had made an effort.

This year, having initially dismissed the scandal as regrettable, but financially immaterial (my paraphrase) when the Evening Standard first asked it in early March, it has set aside first £12 million, and now £29 million to pay redress.

All as a result of buying a company for which it paid just £46.2 million.

The FCA recently reviewed a sample of the British Steel transfers to find only a fifth – one in five! – had been suitable.

The rest were done presumably to fill the advisers’ pockets with fees and commissions.

Given that Lighthouse did nearly 300 of these transfers, the fear has to be that we will be seeing more money set aside in the coming months.

Two lessons to be learned:

One, don’t scrimp on your due diligence before businesses.

Two: never transfer out of a deferred benefit pension, no matter how silver-tongued the adviser is who’s telling you to do so. Unless you’re about to die, transferring is almost always better for the adviser than you.