Labour MP Frank Field, chairman of the Work and Pensions select committee, has criticised the Financial Conduct Authority's (FCA) regulatory action to tackle concerns about the British Steel Pension Scheme (BSPS) case “grossly inadequate”.
In a letter to FCA’s head of supervision Megan Butler, Mr Field argued that “insufficient protections are in place to prevent consumers with defined benefit (DB) pension pots being seduced into a transfer against their interests”.
He said: “While the protection of requiring those with rights worth over £30,000 to take financial advice before transferring is helpful in theory, it is useless in practice if that advice is shoddy or just plain crooked.”
Steelworkers have until 22 December to decide whether to move their DB pension pots to a new plan being created, BSPS II, or stay in the current fund, which will be moved to the Pension Protection Fund (PPF).
The scheme has about 130,000 members of which 43,000 are deferred, which means transferring out of their pension is an option for them.
FTAdviser reported in November that several steelworkers appeared to be transferring out their pensions after being lured by cheap deals by unregulated introducer firm Celtic Wealth Management & Financial Planning, which then referred the clients to advice firm Active Wealth.
Mr Field, which branded FCA’s action as “an extraordinarily cautious approach,” asked Ms Butler if the regulator has considered the possibility of suspending all DB transfer advice while reparative action is taken, and if such approach has been discussed with the government.
He also questions if the current £30,000 minimum threshold for DB transfers – from which savers need to seek out financial advice – is adequate, of if it is “time to start from scratch”.
Ms Butler was present at a hearing last week in Parliament, where she gave the name of three firms which stopped conducting DB transfers due to concerns about their advice process.
Three more firms have, in the meantime, halted their pension transfers.
Later last week, she wrote to Mr Field giving more details of the watchdog’s work, revealing that the FCA has visited and/or reviewed files from firms responsible for more than half of the pension transfers out from BSPS.
The regulator’s register was the target of criticism in one of these hearings, with steelworkers struggling to use it to find a suitable financial adviser.
Mr Field said: “The website is clearly confusing and designed with the industry rather than consumers, in mind.”
In his letter, he questions if the regulator will be making improvements to the register, “making it far clearer when a company is suspended from certain activity”.
He also asks Ms Butler why the FCA doesn’t publicise the suspensions from the database, and why the regulator is relying on voluntary suspensions for fast action, and if legislative change is needed to allow suspending firms pending further investigation.
Last, but not least, Mr Field questions Ms Butler on what guidance and reassurance the FCA will be giving to steelworkers which are in the process of transferring out their pensions with the suspended firms, and how will they be compensated if they have been badly advised.