Campaigners have welcomed the regulator’s plans to introduce a redress scheme for British Steel Pension Scheme members who were misadvised, but have questioned the criteria for eligible claims.
Nick Smith, MP for Blaenau Gwent, who has been calling for a redress scheme for some time, said he was “very pleased to hear” that the Financial Conduct Authority will be consulting on a redress scheme for steelworkers, saying it was the “best course of action” to put things right.
The City watchdog announced this morning that it will consult on a redress scheme which would be limited to BSPS transfer advice given between March 1, 2017 to March 31, 2018, and would ask firms to review their advice, and if found unsuitable, provide compensation.
But Smith said he would challenge the narrow timeframe for eligible claims the FCA has proposed so that no steelworkers are left out.
He added: “I will be pursuing this again with the regulators in the New Year.”
Laura Robinson, partner at law firm Clarke Willmott, which has been helping steelworkers seek redress through the regulatory channels, said she was also “at a loss” as to why the scheme would only cover transfers during this time, saying a large number of steelworkers, predominantly based in the North of England, transferred out before March 2017.
Robinson said: “It is those steelworkers who are running out of time to take action to recover their losses soonest and, because of the timing of the transfers, those who have suffered the greatest losses. The FCA should be asked to provide an explanation in that regard.”
Scepticism remains
Elsewhere there were concerns about whether advisers should be the ones calculating the redress owed.
The FCA will propose that firms should review their advice, and if found unsuitable, provide compensation.
It has already warned firms they must retain their assets and not “dispose of, withdraw, transfer, deal with or diminish the value of any of their assets (including their client bank) and any funds that they hold” in the meantime.
Smith said: “I appreciate that the FCA has told firms that they must be transparent and not bury their money away during this consultation but I am concerned that it appears IFAs are being asked to mark their own homework.
“IFAs are being asked to assess the quality of their own advice and calculate compensation using guidance which could provide room for interpretation in their own favour.”
Robinson said the “devil will be in the detail of the scheme”.
She added: “We have already experienced advisers interpreting the FCA’s own guidance in their own favour and attempting to find loopholes to avoid paying proper redress, so any redress scheme will need to provide clarification on those issues.”
PI insurance knock-on
Advisers also welcomed the FCA’s move saying bad actors had dragged the reputation of the whole industry down.
Dominic James Murray, chief executive officer and financial adviser at Cameron James, said: “These members deserve redress from those individuals and firms that effectively took advantage of their situation or lack of understanding of the safeguarded benefits and the guaranteed income for life that they were giving up.”
But Al Rush, principal of Echelon Wealthcare, warned: “We should also remember that the periodic review of pension transfer redress guidance is due at the same time. It would be an especially cruel blow if after all this time, the redress scheme coincided with more modest compensation.”
Robinson said there was a need to reform PI insurance for advisers, saying the redress scheme could push more firms into insolvency, despite the regulator's best efforts to prevent this.
She said: “It is imperative that the FCA launches a project around bringing PI into line with other professions where the bad behaviour of the minority is not paid for by the good.”
Others believe the trustees have also played a part in the BSPS debacle.
Kevin Hollister, director at retirement calculator Guiide, run by introducer Bespoke Retirements, said many members considering a transfer had been signposted to Unbiased or the FCA website.
“Four years on, trustees of around 80 per cent of DB schemes are still providing members with very similar signposting today,” he said.
“At Guiide we believe the focus is currently the wrong way round and it ought to be mandated, or at least strongly encouraged, that trustees put in place access to vetted and reputable DB transfer specialists for their members.”
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.
Over recent months, the FCA, along with the Financial Ombudsman Service, the Financial Services Compensation Scheme, and MoneyHelper, have travelled to Swansea and Scunthorpe to hold one-on-one sessions with steelworkers to discuss their situations and offer help.
The regulator said DB advice firm numbers have shrunk from 3,000 in 2018 to 1,200 now as a result of the regulatory crackdown.
amy.austin@ft.com
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