British Steel  

FSCS pays out £5.7m over British Steel adviser

FSCS pays out £5.7m over British Steel adviser

The Financial Services Compensation Scheme has paid out more than £5.7m on 95 successful claims against a collapsed firm which advised British Steel clients.

In total, the lifeboat scheme has received 137 claims to date against S&M Hughes Limited, which trades as Crescent Financial. Of these 33 are in progress and 9 were unsuccessful.

S&M Hughes entered default back in August 2020 after it was placed into liquidation in September 2019.

The firm was told to cease all regulated activities by the Financial Conduct Authority in May 2019 and sold its client book to Portfolio Financial Consultancy in July of the same year.

At the time, Portfolio told FTAdviser it would not be taking on S&M Hughes’s liabilities as part of the deal and the money paid would be used to fund any future claims against the advice given to its clients.

The latest statement from its liquidators, published on Companies House last month (October 28), showed the joint liquidators had identified an overdrawn director’s loan account.

The liquidators then sought advice from their solicitors, Clarke Willmott, regarding the validity of the potential claims against the director of the firm.

The report stated: “It was considered appropriate in the circumstances to seek mediation as an alternative to litigation.

“Accordingly, in October 2021, mediation was held and this resulted in the director making an offer to the liquidators in full and final settlement of the claims against him.”

The offer was accepted and the settlement consisted of an upfront payment of £190,000, with a further £185,000 to be paid on a deferred basis.

In September, the FSCS said it had paid out £21.5m to members of the British Steel Pension Scheme who were wrongly advised to transfer their defined benefit pensions.

It had so far made 482 decisions, including decisions to reject a claim, with an uphold rate of 88 per cent.

The average compensation amount has been £50,000 per claim but the overall payout could grow significantly as it still has claims to process.

Lawyers for the steelworkers have previously estimated the industry could face a compensation bill of between a quarter and a third of a billion pounds for BSPS transfers, even with steelworkers not being fully compensated for poor advice. 

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 an 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.