The Financial Conduct Authority (FCA) flagged 26 financial advice firms involved in the British Steel pension transfer debacle as having a “high risk model,” an official at the regulator has said.
Speaking at The Great Pensions Debate in Port Talbot today (10 July), the FCA’s technical pension specialist Chris Hewitt said the regulator identified two factors in determining whether a firm was high risk, including “a high conversion rate, where the adviser is recommending a transfer to the vast majority of clients,” and “a high proportion of insistent clients”.
As a result of identifying the 26 firms, the watchdog then visited 14 firms and conducted a further 12 desk based reviews.
Mr Hewitt said: “We reviewed 172 files across those, from which 34 per cent were unsuitable, and 10 per cent failed to demonstrate suitability.
“As a result, 13 firms stopped advising on DB transfers.”
Members of the British Steel Pension Scheme (BSPS) 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 existing fund, which was later moved to the Pension Protection Fund.
The scheme had about 130,000 members of which 43,000 were deferred, which means transferring out of their pension was 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 firm, the first one to be stripped of its transfer permissions, has entered into liquidation.
A second firm, Retirement & Pension Planning Services, based in Barnsley, as also appointed liquidators.
In the meantime, a group of steelworkers in Port Talbot has instructed a solicitor firm to pursue a legal case against all parties involved in the pension transfer scandal.
The regulator has announced that it will be collecting data from all financial advice firms which hold pension transfer permissions during this year.
In January, the watchdog sent a letter to all firms holding pension transfer permissions revealing the red flags the regulator will be looking for when it enters advisers' offices.