The Financial Conduct Authority has written to firms who gave pension transfer advice to British Steel Pension Scheme members between May 26, 2016 and March 29, 2018.
Alongside its consultation paper on the BSPS redress scheme published today (March 31), the FCA has written a Dear CEO letter setting out the actions it expects firms to take with immediate effect.
This letter replaces the Dear CEO letter issued on December 22, 2021, in which it outlined that it would be preparing to consult on a redress scheme for members of the BSPS who transferred out of their pension after receiving bad advice.
In the letter also sent today, the FCA emphasised that firms are required to have adequate assets to pay any compensation due and urged them to not avoid their responsibilities.
If they do not have adequate financial or non-financial resources they must notify the FCA immediately.
The City watchdog said: “We expect you to be accountable for the actions your firm takes in response to this letter. Since 2017 we have been reviewing the advice given to members of the British Steel Pension Scheme.
“Our work to date shows high levels of unsuitable pension transfer advice were given to British Steel Pension Scheme members. These levels of unsuitable advice are higher than those we have seen for advice given to members of other defined benefit pension schemes.”
Under the proposed redress scheme, firms which advised on BSPS transfers would be required to review their advice.
If the advice was unsuitable and resulted in a financial loss for former BSPS members, the firms will be required to provide compensation.
The FCA said it requires firms to have financial resources that are appropriate for the risk of harm and complexity of their business to ensure they can meet liabilities as they fall due.
These liabilities may result from claims for poor advice and firms must meet the principles for businesses.
“Firms may have specific prudential requirements that apply to them, including being required to have adequate professional indemnity insurance,” it said.
The FCA said it expects firms who advised BSPS members to comply with the relevant prudential requirement and be able to meet liabilities as they fall due.
“So far as possible, and in line with your existing commitments, we request that you retain the firm’s assets in the way we outline below. This is to ensure that you can meet the costs for carrying out a review and compensating customers for any unsuitable advice your firm may have given British Steel Pension Scheme members, if we implement a redress scheme.”
With immediate effect, the FCA said firms who advised BSPS should not dispose of, withdraw, transfer, deal with or diminish the value of any of their assets and any funds that they hold, except in the ordinary course of business.
It also said firms should ensure that any payment or disposal of assets is in the ordinary course of business or consistent with usual monthly expenditure such as payments to suppliers to meet contractual obligation and salary payments.