Bailey to be grilled by MPs over BSPS saga

On June 13, Bailey, who is also the former chief executive of the Financial Conduct Authority, will give evidence to the Public Accounts Committee as part of its inquiry into the British Steel pension scheme transfer saga.

Bailey was head of the FCA from 2016-2020, during which time it came to light that thousands of steelworkers had been misadvised to transfer out of their defined benefit pension scheme.

The current chief executive of the City watchdog, Nikhil Rathi, was questioned by the Pac last month (April 27) alongside Nausicaa Delfas and Caroline Rainbird, the heads of the Financial Ombudsman Service and the Financial Services Compensation Scheme respectively.

High levels of unsuitable advice.NAO report

The committee questioned the FCA in April 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.

In response, Rathi said it might be time to revisit the £30,000 threshold on DB transfer advice and it was revealed that 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.

In April, 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.

The Pac’s inquiry hinges 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 [members] 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. 

What happened with BSPS?

During 2017, BSPS members were asked to make decisions about their pensions as part of a restructure of the scheme.

About 8,000 members transferred out of the 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 Financial Conduct Authority that resulted in a number of advice firms – key players in the debacle – stopping their transfer advice service, while others went out of business.

The debacle created a mountain of liabilities, which lawyers believe could end up costing the industry up to £300mn.

In September, the FCA and FSCS travelled to Swansea to meet steelworkers who could be due compensation but were met with mixed feelings, with some showing no interest while others claimed they were unable to book a place.

The City watchdog also travelled to Swansea in November to meet steelworkers about bringing possible claims against their adviser.

Last month, the FCA began using emergency powers to prevent firms who advised members of the BSPS from disposing of assets to avoid paying compensation.

The regulator introduced these emergency rules without consultation in a policy statement and said the changes were in light of the risk that some firms will take steps to get rid of their assets if the rules were consulted on first, with the measures applying from April 27, 2022.

amy.austin@ft.com