A total of 36 advice firms have started to review their past pensions business as a result of the Financial Conduct Authority's work on the British Steel pension transfer saga, but the regulator has stopped short of introducing a redress scheme.
In a letter responding to Mel Stride, chairman of the Treasury committee, Nikhil Rathi, chief executive of the FCA, said the past business reviews were covering an estimated 1,500 BSPS cases.
In addition, the regulator has 30 enforcement investigations underway and is surveying 310 BSPS members that had transferred out of the scheme to understand the barriers to complaining, the letter dated July 12 said.
Last month (June), the FCA launched a webpage containing information and advice for BSPS members.
It has also written to 7,700 former members to inform them that many had received unsuitable advice and should consider complaining, and set out how to do so.
In Stride’s original letter (sent June 29), he asked whether the FCA would use its section 404 powers, under which it can make rules to provide a redress scheme.
It can exercise the power where it has seen “evidence of widespread, or regular, failure by firms to comply with requirements, which has resulted in consumer loss and where it is desirable to make rules for securing redress”.
Rathi said the regulator had not ruled out its use but that there were a wide range of considerations underpinning any decision to use it.
Rathi said: “This power represents a significant intervention in a market and can have far-reaching consequences when used. As such, we must rigorously assess whether the legal test for using this power would be met in this case, including whether this approach is desirable.
“Based on the file reviews undertaken so far, we do not yet consider that we have sufficient evidence to determine whether the test has been met. However, we are undertaking further file reviews to gather more evidence.”
The use of this power in the context of BSPS could have a significant impact on the market and pensions freedoms more generally.
For example, professional indemnity insurers could further restrict or raise the price for their cover, increasing costs for firms.
It may also cause firms to leave the market and therefore avoid paying the redress.
The FCA said this would have implications for the Financial Services Compensation Scheme and would ultimately increase the levy applied to the rest of the remaining firms in the advice market.
But Rathi said the FCA was “intensifying our work” on the existing complaints-led approach and would keep the committee updated on this.
BSPS members were asked to decide by December 2017 whether to move their DB pension to a new plan, BSPS2, or stay in the existing fund, which was then moved to the PPF as part of a restructuring of pension liabilities.
As a result about 8,000 members transferred out of the old scheme, with transfers collectively worth about £2.8bn.
But concerns about the suitability of the transfers were soon raised, leading to an intervention from the FCA that resulted in 10 companies – key players in the debacle – stopping their transfer advice service.