The NAO probe will commence in Spring 2022 and will look at how the Financial Conduct Authority has handled the BSPS scandal in terms of cracking down on poor advice and offering compensation.
The NAO stated: “This investigation will set out the activities the FCA has undertaken to regulate financial advice in the BSPS case, its plans for supporting steelworkers who may be entitled to redress, and the extent to which compensation is being delivered.”
The parliamentary spending watchdog said the FCA had identified that many steelworkers received unsuitable advice, and may have made poor financial choices and lost significant sums of money as a result.
It also pointed out the regulator had encouraged them to revisit the advice they received and complain if they have concerns.
An FCA spokesperson said: “We look forward to working with the NAO. We’ve introduced new rules to raise the standard of pension transfer advice and we’re taking action, both with individual firms and across the sector, to ensure that where consumers lost out because of unsuitable advice they receive compensation.
"We are encouraging former members of the British Steel Pension Scheme to consider whether they should make a complaint about the advice they received, as they may be entitled to compensation.”
There have been calls from the industry and MPs for the regulator to launch a consumer redress scheme, similar to the one set up for Arch Cru victims in 2012, which would compensate steelworkers for the unsuitable advice they received to transfer out of their pension scheme.
The FCA's board said at a meeting in July discussions were held around the available options for securing redress for scheme members. But it concluded it did not have sufficient information to make a decision on a broad brush redress scheme at the time.
Earlier this month, the FCA told FTAdviser “whether or not we undertake a redress scheme is under review and analysis”.
Latest figures from the FSCS showed it has paid out £21.5m in total so far to members of BSPS who were wrongly advised to transfer their defined benefit pensions.
This week (October 18) the FCA said it had written to a further 950 defined benefit pension transfer advice customers to tell them they may be entitled to compensation.
Letters have been sent to customers of firms in liquidation where past business reviews have identified that the firms have given unsuitable advice to some customers.
In total, the FCA has now written to 3,591 DB transfer advice customers this year.
Last month, the FCA spent three days (28-30 September) in Swansea to meet steelworkers who could be due compensation after receiving unsuitable advice to transfer out of their pension scheme.
The City watchdog was joined by the Financial Ombudsman Service, the Financial Services Compensation Scheme, and MoneyHelper to hold one-to-one sessions.
Across the three days, the event had a total of 138 confirmations of attendance, with 128 slots being taken up - a 93 per cent attendance rate, with steelworkers reporting having mixed feelings about the initiative.
The BSPS case
Three years ago British Steel Pension Scheme members were asked to decide 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, or to transfer out altogether.
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 intervention from the FCA that resulted in a number of advice firms – key players in the debacle – stopping their transfer advice service, while others went out of business.
A subsequent suitability review led to almost two-thirds of DB advisers quitting the market, with the FCA saying there are now about 1,200 advisers holding these permissions compared with 3,000 in 2018.
amy.austin@ft.com
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