In a letter to the regulator (sent January 11), the MP for Blaenau Gwent highlighted some concerns he had with plans to introduce a redress scheme for British Steel Pension Scheme members.
The City watchdog announced in December that it was consulting on a redress scheme which would be limited to BSPS transfer advice given between March 1, 2017 and March 31, 2018, and would ask firms to review their advice and, if found unsuitable, provide compensation.
But Smith said allowing advisers to assess their own transfer advice and work out the compensation based on this may not be the best idea going forward.
In the letter, Smith said: “It appears that IFAs are being asked about the quality of their own advice.
“Given we know from the FCA’s own analysis that an exceptionally high amount of unsuitable pension transfer advice was given in BSPS cases, any analysis of the quality of advice or calculation of losses done by the IFAs themselves, where the guidance provides room for interpretation, would be questionable and could result in IFAs benefiting, rather than the steelworkers affected.”
The Labour MP also urged the FCA to act quickly when implementing a redress scheme, saying time was running out for a lot of steelworkers.
Smith said while it was important to get the details of the redress scheme right, by the end of the consultation in March 2022 it will already have been between four and five years after the relevant period that the FCA has set out for those affected.
“By the time the scheme is implemented and advisers agree any compensation, much more time will have passed which is delaying justice for steelworkers for far longer,” Smith said.
Another timing issue was that the the timeframe for eligible claims is to narrow, with Smith questioning the FCA on why those who were impacted by misselling outside of these time limits are not being covered.
He added: “This could especially hit those who were missold before 1 March 2017 who are also at the greatest risk of being timed out by the six year limit to complain.”
Smith has called on the FCA to come down on advisers hard saying the FCA should consider “the toughest possible action should any company not comply in full with your instructions and guidance.”
He added: “For the proposed redress scheme to proceed successfully, advisers will need to be transparent and not seek to deter customers from pursuing complaints.”
Smith has requested a meeting with Sheldon Mills, executive director, consumers and competition at the FCA, to discuss these matters in more detail.
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.
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