The public accounts committee has grilled the Financial Conduct Authority and other regulatory bodies on their handling of the British Steel Pension Scheme scandal and their plans to introduce a consumer redress scheme.
This formed part of the committee’s inquiry into the BSPS saga which saw 7,700 members, many of whom received financial advice, transfer out of the scheme, representing about £2.8bn in funds.
The FCA has since found that many of these members received unsuitable advice and is currently consulting on setting up a redress scheme.
The committee questioned the FCA on whether legislation was needed to make sure a scandal of this scale did not occur again and pushed it to give a timeframe for when steelworkers could expect to see the redress scheme in action.
It also spoke to adviser trade body Pimfa and a lawyer representing the steelworkers to see where it all went wrong.
Here are the key takeaways from yesterday’s two and a half hour session:
1 DB transfer advice threshold
Nikhil Rathi, chief executive of the FCA was asked whether there needed to be changes to legislation to ensure another scandal like BSPS did not occur again.
In response Rathi said it might be time to revisit the £30,000 threshold on defined benefit transfer advice.
As it stands, if an individual is offered a transfer value of more than £30,000, the law requires them to take advice when transferring out of a DB pension.
According to Rathi, this is something the Department for Work and Pensions is looking into.
He said: "Is the £30,000 figure at the right level, because the cost has gone up and so we are getting a lot of feedback from customers with small pots saying it is uneconomic to use pension freedoms."
For example, Rathi said when you take a £35,000 pot, people are finding it is costing them £5,000 to get advice, which is an onerous percentage.
2 Redress scheme
Earlier this month the FCA confirmed plans to move ahead with the proposed British Steel redress scheme which will cover steelworkers who transferred out of the scheme between May 26, 2016 and March 29, 2018.
This is currently out for consultation but there had been no mention of when such a scheme could become reality.
Some witnesses pointed this out to the committee.
Rich Caddy, a former member of BSPS who transferred out, argued the redress scheme has already taken too long.
Tim Fassam, director of government relations and policy at Pimfa, said there was a case for considering whether there should be a broader Treasury-run compensation framework along the lines that it introduced for London Capital & Finance..
In addition Philippa Hann, a lawyer Clarke Willmott who is representing the steelworkers, called the redress scheme “widely optimistic".
She said: "There are significant differences between those who saw compensation at an early stage and those people ought to be compensated in addition and should not be excluded from the redress scheme."
But when pressed on the timing of the redress scheme, Sheldon Mills, executive director of consumers and competition at the FCA, told the committee the regulator expects to have a final decision on the redress scheme by Autumn with the aim to introduce it in January/February next year.