The Personal Finance Society has called on the Financial Conduct Authority to reconsider how it will pay out compensation owed to British Steel pension scheme members.
The professional body has asked the regulator to ditch plans to issue compensation in the form of a lump sum.
In March, the FCA set out plans to deliver £71.2mn in compensation to former members of the BSPS who received unsuitable advice to transfer out of their pension.
However, the PFS argued this form of compensation does not address the central issue of BSPS members giving up a guaranteed income.
The PFS has asked for the Department of Work and Pensions and the Pension Protection Fund to work together to ensure clients are re-admitted to the BSPS or admitted to the Pension Protection Fund.
It said where the defined benefit advice assessment tool process is not adequate to address the individual circumstances in a case, it should allow for advisers to have a right of appeal to an independent, qualified transfer specialist that requires a review of the full file and the specific circumstances involved creating the recommendation.
PFS director of policy and public affairs Matthew Connell, said: “Clients who received poor quality advice to transfer out of the British Steel Pension Scheme transfers should receive compensation, but we are concerned about the way suitability of recommendations will be assessed and whether a lump sum can ever replace a guaranteed income.
“We accept that there were very poor practices among some firms involved in giving advice to British Steel Pension Scheme members. However, the FCA research shows that good advice was also given, which means the review must be fair, proportionate, and operate on a case-by-case basis.”
The PFS said although the timeline set out in the FCA’s consultation on determining compensation is accurate, it raised concerns that advisers giving advice during the period had no way of knowing what information the BSPS would publish in the future.
The PFS shared information with the regulator about cases where advisers were told by the BSPS that early retirement options could not be issued as their client was not old enough in order to encourage the FCA to rethink its approach.
This example highlights how the regulator’s assessment tool process “is not sophisticated enough” to establish a full picture of what could have been reasonably expected from advisers working with limited information rather than the full facts in individual cases, it explained.
In addition, the professional body also raised concerns that the training given to people using the DB advice assessment tool is only around two days compared with the approximately 13 weeks that it takes to become qualified as a pension transfer specialist.
Connell added: “Given that so much of the detriment that applies to BSPS members relates to a loss of guaranteed income, we do not think it is right for the compensation scheme to mandate those who received poor advice only receive a lump sum.
“The regulator needs to rethink their approach and work with the Department for Work and Pensions, The Pensions Regulator plus the Pension Protection Fund to ensure British Steel workers retirements are put back in the financial position they would have been in if they were not advised to transfer out of the British Steel Pension Scheme.”
The PFS has informed the regulator that it is “highly questionable” whether individuals working with DB advice assessment tool training alone are able to consider cases according to the factors that apply to an individual case.
It has urged the FCA should amend the timetable to provide for circumstances where advisers had good reason not to seek information on conversion rates.
A spokesperson for the FCA said: “We welcome feedback from stakeholders on our proposals for a consumer redress scheme. The consultation closes on 30 June and we will carefully consider all responses received. If we decide to implement a scheme, we will aim to publish a policy statement, including final rules, later this year.”
sonia.rach@ft.com
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