In a letter to Nikhil Rathi, chief executive of the Financial Conduct Authority, published today (January 21), MPs raised concerns that the regulator in its current form is not fit for purpose and called on it to step up its actions to ensure that consumers are being well protected.
The letter, written by MPs Nick Smith and Stephen Kinnock, stated: “The FCA should be a champion for consumers.
“Instead, our experiences have been characterised by organisational drift and bureaucratic inertia. Despite our multiple and ongoing attempts to prompt action, the FCA continues to be City-facing and lacks sufficient vision to tackle the issues facing consumers.”
The MPs have now urged the FCA to set up a dedicated consumer arm or taskforce which is able to deal with consumer issues as they arise.
According to the MPs, this should be properly funded and resourced to make sure that future crises do not suffer “delay and inaction”.
The BSPS saga
Both Mr Kinnock and Mr Smith have been campaigning and lobbying regulators, as well as the Financial Services Compensation Scheme and ombudsman service, in order to get justice for British Steel victims.
Three years ago British Steel Pension Scheme members were asked to decide whether to move their DB pension to a new plan, BSPS2, or stay in the existing fund, which was then moved to the PPF as part of a restructuring of pension liabilities, or to transfer out altogether.
As a result about 8,000 members transferred out of the old scheme, with transfers collectively worth about £2.8bn.
But concerns about the suitability of the transfers were soon raised, leading to an intervention from the FCA that resulted in 10 companies – key players in the debacle – stopping their transfer advice service.
A group of lawyers representing steelworkers estimates the overall compensation bill due is at least £250m, but could be as much as £375m.
Lack of enforcement
But Mr Smith and Mr Kinnock still feel that the FCA’s actions fell short of what is needed to tackle this crisis and that the steps taken were “disorganised” and “lacking in urgency”.
They said the FCA must do more to hold bad advisers to account as there are still rogue advisers “reinventing themselves in order to fleece consumers”.
The MPs said: “The FCA needs to use the full strength of its powers of enforcement to ensure that a crisis of this scale is never allowed to happen again. These sharks should be netted.
“Additionally, the malignant role of introducers in the BSPS scandal has not been sufficiently addressed. In many cases, there was a clear joint venture between pensions specialists and introducers, and yet there have been no consequences for the introducers involved.”
The MPs also encouraged the regulator to utilise S166 - skilled person reviews - to highlight bad advice.
A skilled person review is an independent review of a regulated firm, paid for by the firm and usually focusing on specific issues. It can also be conducted if the regulator wishes to delve deeper into a firm's activities.
The FCA could also implement a consumer redress scheme which would see all former BSPS members receive letters from the FCA asking if they would like their case reviewed.
The MPs suggested this could boost the numbers of steelworkers making complaints and receiving compensation.
Earlier this week (January 18), the regulator published data about DB transfers from October 2018 to March 2020, which also looked into BSPS advice.
It found out of the 1,310 firms active in the market, 254 firms (19 per cent) had provided 3,427 clients with a personal recommendation to transfer from the BSPS in 2017-18.
The FCA said it would follow-up with every firm that was involved with this advice and where it may have been unsuitable will ensure corrective action is taken.
amy.austin@ft.com
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