The Financial Conduct Authority has said it will be monitoring pension transfer requests from the Old British Steel Pension Scheme, as the pension fund has exited its assessment period at the Pension Protection Fund.
According to a letter sent to members, the scheme, which had agreed to a full buyout with Pension Insurance Corporation in October 2020, exited its PPF assessment period on November 9.
This means members will now be able to transfer out of the scheme, which they were not allowed during the PPF assessment period, which started on March 2018.
In response, a joint statement from the FCA, the Pensions Regulator and MoneyHelper, read: “The FCA are working with the trustees of the scheme to monitor requests to transfer out and the firms who are advising members on their options.
“All advisers should be clear on the FCA’s expectations when offering advice to members of the scheme. Where the FCA sees unsuitable advice, or bad practice, it will take action.
“The FCA, TPR and MoneyHelper believe transferring out of a DB pension scheme is unlikely to be in the best interests of most consumers,” it added.
Jonathan Hazlett, managing director of Open Trustees, which runs the scheme, said the “[buyout] process is taking longer than expected” and the deal would now complete by late summer 2022.
“This is because of recent legal rulings affecting pensions in general, not just this scheme,” he added.
Until then, because the scheme has effectively left the pensions lifeboat, there will be an increase on benefits for some members, as PPF levels are less than full scheme benefits.
At the pensions lifeboat, non-pensioner members receive compensation based on 90 per cent of what their pension was worth at the time the employer became insolvent.
Three years ago BSPS members were asked to decide whether to move their defined benefit 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 companies — 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.
Maria Espadinha is the editor of FTAdviser's sister title Pensions Expert