A group of more than 70 IFAs have raised questions about the regulator’s figures on British Steel Pension Scheme transfer advice, warning that the new redress scheme could see 343 firms face insolvency.
This week (April 25-27) the British Steel Adviser Group wrote a letter to the public accounts committee (PAC) saying they were “deeply concerned” about the Financial Conduct Authority's direction of travel, particularly regarding their recently proposed BSPS redress scheme.
Earlier this month, the FCA confirmed plans to move ahead with the proposed redress scheme which will cover steelworkers who were given unsuitable advice and transferred out between May 26, 2016 and March 29, 2018.
In a consultation paper, the FCA estimated that 1,400 steelworkers will receive £71.2mn in redress under the scheme.
However, advisers raised concerns that the FCA’s redress scheme for those who were misadvised could push many firms out of the industry.
One letter, which was anonymised, said: “Notwithstanding the fact that many unscrupulous firms and introducers did indeed target British Steel members by recommending offshore, high-risk, unregulated investments (an option the FCA should in our view ban outright) it cannot be emphasised enough that the wider industry, largely comprised of reputable advisers, stepped in to assist British Steel members who had lost faith in the BSPS scheme.”
It added: “Despite this, an estimated 343 firms – most of which are smaller IFAs that cannot now obtain PI insurance, and who are facing likely insolvency – are now expected to bear the costs of a contemporaneously absent regulator, who now refuses to co-operate with the industry by provide information regarding the manner in which it assesses suitability via its DBAAT (Defined Benefit Advice Assessment Tool).”
In its submission, advice firm Acumen IFP said it could be forced to close down if the redress scheme is implemented.
“As a small, family IFA business, we are unable to make plans for retirement and this impacts the whole of the family,’ the firm said.
“While we do not wish to walk away from our responsibilities, we feel the FCA redress scheme is unfair and unwarranted. Steelworkers in the main are happy with the actions they took at the time in 2017 and 2018, but they have been pressurised by the FCA and solicitors to make complaints in the hope that compensation is paid.”
Acumen said individuals would not have made a complaint if the FCA and other parties had not recommended them to do so.
It also said compensation should not be paid directly to an individual but instead should be paid into a pension arrangement, if it was found that the advice was unsuitable and compensation needed to be paid.
“The immediate and long term consequences if the redress scheme is not halted would result in our company closing down and staff members losing their jobs. This could have a major impact on the South Wales area because there could be hundreds of firms closing and making their staff redundant.”