In a letter sent last week (November 18), FS Legal Solicitors said there has been a fundamental change of circumstances since the consultation closed for responses earlier this year.
FS Legal represents the British Steel Action Group, which is made up of advice firms facing redress bills for DB transfer advice.
The firm said the BSAG submitted a “substantial” response to the consultation, but it wanted to address the “fundamental change of circumstances” which has occurred since the closing date.
These changes are the steep rise in the base rate of interest, which rose from 1.25 per cent when the consultation closed in June to 3 per cent currently.
The value of DB pensions are calculated using the price of bonds, which has crashed so far this year.
“We consider that a re-consultation is necessary…in order to enable representations to be made by all interested stakeholders, including BSAG,” the letter said.
Our analysis does not support the suggestion that most BSPS members will have suffered no loss or are in surplusFCAFS Legal said the re-consultation should look at to what extent former BSPS members are likely to have suffered loss as a result of any unsuitable advice received in connection with proposed transfers out of the BSPS.
The letter outlined how former BSPS members have expressed their view that the redress values have been “significantly” reduced in the current economic climate, as well as modelling by consultants OAC, which shows since mid-2022 the value of redress for a typical BSPS members has been nil.
“It is now clear that in the vast majority of cases such individuals have either suffered no loss or are in surplus by comparison with the position they would have been had they not transferred out of the BSPS,” the letter said.
Furthermore, it highlights the language used by the FCA in its consultation, speaking about members of the BSPS who were given unsuitable advice “and have suffered financial loss as a result”.
The FCA estimated that 94 per cent of consumers who received unsuitable advice suffered losses, with the average amount of £60,000 making up a total of £71.2mn owed to customers.
“Despite the centrality of the FCA’s assumptions and estimates of the losses suffered by former BSPS members, and the compensation which would be payable under the scheme, they are simply no longer sustainable,” the firm said.
In response, the FCA said it needs to meet “strict legal tests” to implement a redress scheme, and has taken into account the changes in gilt yields as part of this work.
“Our analysis does not support the suggestion that most BSPS members will have suffered no loss or are in surplus,” a spokesperson for the watchdog said.
“The circumstances around BSPS transfers were exceptional, with former members receiving significantly higher levels of unsuitable advice compared with other cases.”
The regulator said it will publish its final plans for the redress scheme by the end of the year.
Earlier this year, the FCA consulted on a consumer redress scheme, which will review the advice given to individuals transferring out of the BSPS between May 2016 and March 2018, regardless of whether the consumers were happy with their outcomes or not.
It is estimated that compensation payments could be looming over 343 companies, with the FCA anticipating that 1,400 individuals will receive redress and 40 advising firms will enter insolvency if the proposals go ahead.
The FCA is also consulting more widely on its existing redress guidance, with any changes affecting all companies that have, or plan to purchase, a book of defined benefit transfer advice.
sally.hickey@ft.com
