Financial advisers, who saw their defined benefit (DB) pension transfer permissions suspended during the British Steel debacle, should expect the regulator to request a past business review, Rory Percival has said.
The former Financial Conduct Authority (FCA) technical specialist said at The Great Pension Debate in Port Talbot today (11 July) that this was the logical next step for the watchdog to take.
As a result of the regulator’s work into financial advice provided to members of the British Steel Pension Scheme (BSPS), 26 firms were classified as having a “high risk model”.
From these, 13 firms stopped advising on DB transfers.
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 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 meant 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.
Since then, Active Wealth and Retirement & Pension Planning Services – another one of the 13 flagged firms - have gone into liquidation.
However, all these firms should expect to hear back from the FCA, Mr Percival said.
He said: “I'm speculating, because even though I know the people at the FCA quite well, they don't tell me anything they can't tell you.
“But having worked there and knowing how these things work, it is inconceivable that they wouldn't want these firms to do past business reviews.”
Regulated firms can be required to carry out past business reviews on a particular tranche of business as part of either a regulatory investigation or as a result of enforcement action.
Mr Percival said: “When I met a professional indemnity insurer earlier in the week, his concerns for the market was not about individual clients making complaints, but about the FCA's problems with the firms that ended up doing a past business review and paying out a large amount to clients.”
Earlier at the conference Sir Steve Webb, director of policy at Royal London, called on the government to intervene in the professional indemnity (PI) insurance market, after some financial advisers have been struggling to get cover.
FTAdviser reported recently that advisers performing a high volume of defined benefit (DB) pension transfers are having their level of PI insurance coverage reduced to £500,000, as insurers are wary of the risks involved in this type of business.
In May it emerged one pension transfer specialist was forced to close down after it was unable to find PI cover at “commercially acceptable” terms.
maria.espadinha@ft.com
