Financial advisers involved in the British Steel pension transfer scandal will have to undergo an audit of their processes to get their professional indemnity (PI) policy renewed, and even after that there is no guarantee of coverage.
PI insurers have introduced a blanket exclusion in new policies referring to steelworkers defined benefit (DB) transfers, which means that firms which have advised these members won’t be able to get their policy renewed.
Julian Brincat, head of IFA practice at PI broker Protean Risk, told FTAdviser this is the current practice due to “all the negative press and because there is a very negative spotlight on these transfers”.
He explained that the only way to work around this exclusion is if the adviser hires a DB specialist auditor to review the firm’s files and do a very in-depth audit on this advice.
He said: “Providing that is suitable - everything has to be perfect - then there is maybe some potential for getting them covered by insurers.
“But usually this process happens close to renewal, so it is very difficult to get that done and to get the result prior to an insurer deciding if they want to cover it or not.”
Jamie Newell, managing director at broker o3 insurance, also confirmed that this is the current process for these advisers.
He said: “They need to analyse all the transfer they made for British Steel [members], review their processes, and make sure that it was all compliant from a regulatory point of view, but also from a commercial risk point of view.
“There is a possibility of lifting the exclusion, on a case by case basis.”
Around 130,000 members of British Steel Pension Scheme (BSPS) had to choose to move their DB pension pots to a new plan being created, BSPS II, or stay in the current fund, which would be moved to the Pension Protection Fund (PPF), by December.
Of the total members, 43,000 were deferred, which meant they could transfer out but had to seek advice in order to do so.
FTAdviser reported in November that several steelworkers appeared to be transferring out their pensions after being attracted to cheap deals by Celtic Wealth Management & Financial Planning, which then referred the clients to advice firm Active Wealth.
Active Wealth entered liquidation in February after the firm was told to cease any pension transfer activity by the FCA months earlier.
Ten firms suspended their pension transfer permissions following intervention from the Financial Conduct Authority (FCA) over BSPS.
Mr Brincat said that he has a mix of customers and prospective clients that have been involved with British Steel.
“The ones that had their policy renewal in the first quarter of the year were able to get cover and some of them were subject to an audit and got an increase level of coverage.
“A lot more firms are getting in touch early on in their policy period - which is something we always promoted - and asking for advice and discussing the state of the market.”