Damian Fantato  

Steelworker's advice charge shows need for new FSCS model

Damian Fantato

Damian Fantato

Port Talbot is known for two things principally: the unusually high proportion of actors born in the town and its steelworks – one of the biggest in the world.

Unfortunately, the town has not found itself in the news recently for its connections to Richard Burton, Anthony Hopkins, Rob Brydon or Michael Sheen, but for the way its steelworkers have been treated in the fallout from the closure of the British Steel Pension Scheme.

The background to this case has been fairly well covered left, right and centre, but the latest reason for the debacle to find itself in the news is because of the adviser charges being paid by steelworkers.

In one instance – and in proof that some of these people just cannot catch a break – a steelworker called Mark Nicholson had a £1,500 fee taken from his account to pay for advice from a company that no longer exists and which involved transferring his defined benefit pension scheme into a self-invested personal pension.

For its part, the Sipp provider said it had no choice but to allow the fee to be taken, given the contractual instructions the client had himself given.

This is obviously a grey area: the advice company in question, Active Wealth, is now in administration and the more money the administrators recover, the better for its creditors and – ultimately – the Financial Services Compensation Scheme, which is tasked with paying claims.

In fact, advisers might instinctively like the idea of the FSCS receiving more money from administrators so its levy is not quite as big.

This case proves how skew-whiff the FSCS’s funding model is: it can pit the interests of advisers against the interests of their clients.

The Financial Conduct Authority has put forward recent changes to how the FSCS is funded, but ultimately a more root-and-branch approach is needed.