The Financial Conduct Authority (FCA) has come out fighting against accusations from the work and pensions select committee that the regulator was asleep at the wheel over unsuitable financial advice to members of the British Steel Pension Scheme (BSPS).
In a letter sent today (18 January) to select committee chair Frank Field, FCA chief executive Andrew Bailey revealed the regulator has concerns about as much as half of the pension transfer advice given the British Steel workers, with a third of recommendations found to be unsuitable.
But Mr Bailey said the FCA would "wholly reject the committee’s conclusion, and fundamentally disagree that we may be ‘sleepwalking into another mis-selling scandal'.
“I am concerned that the committee’s conclusion does not show the full scale of the work we are doing, nor does it factor in the role of other organisations in what is a coordinated exercise,” he said.
Labour MP Mr Field said on Friday (12 January) that the regulator's action on BSPS has been "grossly inadequate".
Mr Field said: "The FSA was reformed and renamed amid concerns that it was too close to the financial businesses it was supposed to regulate.
“From their intervention in this affair it seems clear that the FCA's actions still effectively protect these businesses' ability to make money out of pension funds, rather than protecting pension savers.”
Steelworkers had until 22 December to decide whether to move their defined benefit (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.
The Work and Pensions select committee, which held hearings with steelworkers, financial advisers and regulators amid concerns about the financial advice being given to the members, will publish a specific report on this case early this year.
Following FCA intervention, eight firms have decided to stop providing advice on pension transfers.
During its supervisory work, the regulator contacted 109 financial adviser firms, 66 of which were required to provide more information. It then drilled down further into the advice given by 21 firms.
From the 129 client files reviewed so far, 51 per cent of the advice given was suitable, Mr Bailey revealed.
The FCA found that 33 per cent of these files contained unsuitable advice, and with 16 per cent it was unclear whether the advice was suitable or not.
Mr Bailey said: “We are contacting these firms to set out our concerns; however, of those 21 firms, we have seen no evidence of funds being invested in scams.
“I cannot tell you more about those cases at this stage as it would breach the Financial Services and Markets Act to so, but we are not complacent in our approach to potentially unsuitable advice.”
The watchdog also revealed that it contacted 11 self-invested personal pension (Sipp) providers, to find out if they had received, or were expecting to receive, any transfers out of BSPS.
Mr Bailey added: “Where this was the case we asked them for the names of the advice firms as well as details of the transactions (including the receiving funds).”
According to Steven Cameron, pensions director at Aegon, many individuals are desperately seeking advice on whether to transfer from DB schemes, and “it’s important not to sensationalise this highly complex and emotive topic”.
He said: “The FCA has recognised their current guidelines on such transfers are in need of an overhaul to allow for today’s retirement choices, and we expect their new guidelines by March, which should give advisers the clarity they need to advise with confidence, and begin to meet pent up consumer demand.
“The priority needs to be making sure anyone who is currently receiving advice, or receives it in future, can be confident in it.
“It’s also important to identify any failings in past advice, but it’s wrong to suggest anyone, be it the FCA or the financial community is sleepwalking into any form of mis-selling scandal.”
maria.espadinha@ft.com
