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FCA reiterates clients of failed firms will not be in BSPS redress scheme

FCA reiterates clients of failed firms will not be in BSPS redress scheme

The Financial Conduct Authority has emphasised that British Steel Pension Scheme members who were clients of now failed firms will not be included in the proposed redress scheme. 

In a letter to the FCA dated August 1, Work and Pensions committee chair Stephen Timms asked the regulator about BSPS members who were proactive in taking action and received capped compensation from the Financial Services Compensation Scheme.

Timms said those who received this compensation may not feel that “the harm they suffered has been put right.” 

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It asked the regulator if it would exclude people who have already received FSCS compensation from the BSPS redress scheme, and what will happen to claims in the pipeline. 

In response to Timms, FCA executive director, consumer and competition Sheldon Mills said under the existing proposal, customers of firms that have failed - who may or may not have already submitted a claim to FSCS - will not be included in the scheme. 

“This includes people who have already received compensation from the FSCS,” he wrote. “Our proposal stipulates that authorised firms would need to follow detailed rules when assessing suitability of advice and, where appropriate, calculating and paying redress. 

“Customers of firms that have failed will not be included in the redress scheme because there is no longer an authorised firm to carry out the scheme steps and pay redress.”

In the letter, dated to September 29, Mills said customers of firms that go out of business before the scheme starts can make a claim to the FSCS, if they have not already done so.

If a scheme is implemented, for any firms that go out of business after the scheme starts, where possible FSCS will proactively assess claims that are within the scope of the scheme, without the customers needing to make a claim. 

Mills said the FSCS will also calculate redress in line with the scheme rules and will pay compensation up to the relevant limit. 

“The FSCS compensation limits therefore apply to customers of firms that have failed after and before any consumer redress scheme is implemented (as well as customers who have already received compensation from the FSCS)”, he said.

“The FSCS’s operating costs and compensation payments are funded by levies on financial services firms. FSCS compensation limits were last reviewed between 2016 and 2018. 

“In light of feedback received, we increased the limit from £50,000 to £85,000 for certain categories of claim for firms declared in default by the FSCS from April 2019 onwards. This limit was considered to represent an appropriate balance between consumer protection and the cost to industry levy payers, which are ultimately passed on to consumers.”

Last December, the FCA published the compensation framework review discussion paper in which it outlined current compensation limits are set at an adequate level to cover a reasonable proportion of customers’ claims.