FSCS denies Steelworkers special discount rate

FSCS denies Steelworkers special discount rate

British Steel Pension Scheme members will not receive a reduced discount rate for compensation calculations, the Financial Services Compensation Scheme has decided.

The FSCS had been reconsidering its method of calculation following proposed changes at a parliamentary meeting in November, which if implemented could have seen steelworkers receive the maximum compensation awarded by the scheme of £50,000.

Philippa Hann, solicitor at Clarke Willmott, and Alastair Rush, principal at Rutland-based Echelon Wealthcare, who were representing the steelworkers advised by Active Wealth, made a case at the meeting for changes to be made to the compensation.

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The FSCS was told the discount rate currently used to calculate redress – of 3.7 per cent - was too high since it assumed 50 per cent equity content when the BSPS was risk free.

The body was also asked to use today's market value of the investments, due to recent market downturns, and heard the compensation should also consider the cost of advice since it was now an ongoing commitment for those that were poorly advised to transfer out. 

The FSCS had announced earlier this month it had agreed to revisit claims based on out-of-date values and to take into account previous annual adviser charges, ultimately satisfying two of the three proposed changes.

Ms Hann said: "Whilst this is disappointing, it is not unexpected.  

"They felt they must treat all applicants equally whether they have transferred from the BSPS or another final salary scheme." 

Ms Hann said the FSCS’s decision to use valuations no more than one month old when addressing the claims and to include previous ongoing adviser costs will see the level of compensation increase for scheme members.

She added: "I anticipate and hope that decisions will be made relatively swiftly now,  in weeks not months."

Mr Rush said: "We have got two out of the three aspects that we lobbied for.  

"We always knew that the third was a stretch, so although we're a little disappointed, we're also pragmatic enough not to be too surprised at the FSCS decision to keep the discount rate where it is."

Mr Rush said the revaluation of funds and taking into account previous annual adviser charges clarified and helped matters for the scheme’s members.  

He said: "I know the men and their families are very grateful to Stephen Kinnock and Nick Smith for all their hard work, and I'm meeting Stephen tomorrow to help further where I might be able to.  

"I'm grateful to FSCS and to FCA for taking the time to meet with us in December at Westminster, and I hope this announcement heralds the men taking one step further to getting their lives back on track."

Mark Neale, chief executive at the FSCS, said the issues to consider were if the FCSC was bound to adhere to previous FCA guidance, and, if not, should it depart from the methodology for BSPS members in particular.