British Steel  

FCA had ‘inadequate oversight’ of advisers targeting BSPS members

FCA had ‘inadequate oversight’ of advisers targeting BSPS members

The Financial Conduct Authority had “inadequate oversight" of firms involved in the British Steel Pension Scheme transfer scandal and was “consistently behind the curve” when responding to issue, MPs have claimed.

A report into the handling of the BSPS saga by the Public Accounts Committee, published this morning (July 21), looked at how the regulator handled the issue, the proposed redress scheme and how prepared the FCA is for future risks.

The committee found the FCA was “consistently behind the curve” and despite being aware of the potential risks caused by pension freedoms being introduced in 2015 it “failed to take preventative action to protect consumers”.   

The group of MPs said that by 2017 when the BSPS was well underway, the FCA still “did not know” what was happening in the DB market and it had “inadequate oversight of the firms involved”, only later finding out that “47 per cent of cases the advice provided was unsuitable”.  

The committee also pointed to wider problems in the FCA’s authorisation and oversight of small firms, with which the FCA acknowledged there were clear issues.

The MPs said: “The FCA’s lack of access to timely data and insight into the DB pension transfer market indicates that the regulator was slow to understand the risks to pension members and how to  effectively monitor these. 

“This was made worse by the FCA’s focus on regulation of big firms which left smaller firms out of the spotlight, as the former chief executive of the FCA admitted.”

It accused the FCA of failing to protect BSPS members from “unscrupulous financial advisers” who were incentivised by existing fee structures and regulation to provide unsuitable advice that led to around 7,800 steelworkers losing an average £82,600 in life savings, with some losing up to £489,000. 

Redress

The committee argued that the FCA’s response was “focussed on gathering further evidence and issuing letters to firms, rather than enforcing against non-compliance, to date it has issued only one fine".

The Pac said the complaints-based redress process adopted by the FCA proved “ineffective” for BSPS members, with only 25 per cent of BSPS members raising complaints. 

Many have not been compensated fully, and for those whose advice firms have entered insolvency, £21mn in compensation has been lost due to financial limits, it explained.

In March, the FCA set out plans to deliver £71.2mn in compensation to BSPS members who received unsuitable advice to transfer out of their pension.

The regulator estimated that 1,400 steelworkers would receive £71.2m in redress under the scheme. 

But the Pac said there are already concerns that potentially thousands more cases of mis-selling will push the FCA’s estimated £71.2mn cost of compensation for those who received bad advice significantly higher.

The committee also pointed to wider problems in the FCA’s authorisation and oversight of small firms, its access to data and intelligence to identify problems and its use of enforcement powers to respond to them quickly.