British Steel  

MPs to quiz FCA chief over BSPS scandal

MPs to quiz FCA chief over BSPS scandal
FCA chief Nikhil Rathi [Photographer: Chris Ratcliffe/Bloomberg]

The chief executive of the Financial Conduct Authority will be questioned by MPs as part of an inquiry into the British Steel Pensions Scheme saga.

Nikhil Rathi will be joined by Nausicaa Delfas and Caroline Rainbird, the heads of the Financial Ombudsman Service and the Financial Services Compensation Scheme.

All three executives will be questioned by the Public Accounts Committee on the fates of 7,700 BSPS members who have transferred a collective £2.8bn out of the pension scheme, for some members to find they had received "unsuitable" advice incurring "significant" losses. 

A date for questioning is yet to be set, but the committee has asked for evidence to be submitted ahead of April 20.

Questions will focus on “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”, according to the committee.

The inquiry will hinge on a report published by the National Audit Office on March 18, which found 263 pension scheme members have lost £18mn of redress to date because of financial advisers going into liquidation and the limits to current compensation provided.

While the total loss of each steelworker is not recorded, for claims made to the FSCS the average individual loss is £82,600.

This was down in large part to the regulated advice market, which the NAO said “failed to protect them adequately” with 47 per cent of advice deemed to be “unsuitable”.

The report also concluded that despite “high levels of unsuitable advice”, to date “only a small proportion” of BSPS members have made a complaint through the statutory redress organisations. 

“The FCA, the Financial Ombudsman and FSCS should reflect on their experiences in trying to reach affected consumers to understand what worked well and what could be improved in future,” the NAO said in its report summary.

Issues the UK’s financial regulators still need to overcome, according to the report, include the fact the redress arrangements have not compensated all individuals fully, that the costs of redress has impacted on the wider financial services industry, and that the number of firms providing direct benefit pensions transfer advice “has more than halved”.

Responding to the report, the industry called for the government and regulators to play a more "active role" in protecting pension savers.

MP Nick Smith said last week “not enough has been done to hold those responsible” for the scandal to account. He said advisers’ “introducer cronies” have so far evaded action. 

“I believe that many of these instances involved conspiracy and possibly warrant prosecution as criminal cases,” he said.

Kevin Hollister, founder of Guiide, also highlighted the need for regulators to require pensions schemes to either appoint their own vetted advisers, or signpost to a third-party, vetted service.

“Leaving members to find their own advice, which can lead to the issues seen in the BSPS cases is simply no longer an option," Hollister explained.