The Financial Conduct Authority has fined Pembrokeshire Mortgage Centre Limited £2.4mn for giving clients unsuitable advice to transfer out of the British Steel Pension Scheme and other defined benefit pension schemes.
The regulator said the advice firm, trading as County Financial Consultants, advised 420 customers - nearly two-thirds of whom (268, or 64 per cent) were BSPS members - on whether to transfer out of their defined benefit scheme.
The majority (403, or 96 per cent) of these 420 customers were advised to complete a pension transfer, earning the advice firm over £2mn in transfer and ongoing advice fees, according to the FCA.
“PMC gave unsuitable advice in 60 per cent of cases, even higher than BSPS as a whole,” the City watchdog said in a notice published today (December 2).
FCA evidence has previously found that 46 per cent of BSPS transfers were unsuitable.
In a separate final notice, the regulator said Pembrokeshire Mortgage Centre’s transfer advice “disproportionately affected British Steel Pension Scheme members”.
In one client case highlighted by the FCA, Pembrokeshire Mortgage Centre was found to have classed a British Steel customer as ‘low risk’, despite them having a child with long term care needs, a mortgage to pay and no other significant assets or investments.
The failings which resulted in this multi-million pound fine spanned June 2015 and to December 2017.
The FCA found inaccuracies in transfer value analysis reports, suitability reports which contained “misleading and unclear” information, and that the firm used similar wording across these suitability reports, recommending the same self-invested personal pension product to 96 per cent of its BSPS customers.
Failings "were amplified" between August and November 2017, according to the regulator, when the firm was advising an average of 65 customers per month, compared with the 46 customers it provided pension transfer advice to across the whole of 2016.
"This increased demand was primarily driven by a large number of British Steel Pension Scheme members seeking advice over a short period of time," the FCA said.
The total value of the transferred funds on which Pembrokeshire Mortgage Centre gave advice was approximately £123mn, with an average transfer value per customer of approximately £293,000.
This average transfer value was higher for British Steel members, at £314,000.
At the end of last month, the Financial Services Compensation Scheme upheld 213 pension transfer claims against Pembrokeshire Mortgage Centre and paid out over £13.3mn in compensation.
The advice firm’s uphold rate for FSCS claims was 88 per cent. In 80 cases (38 per cent of those upheld), the FSCS awarded the claimant the maximum compensation available of £85,000.
Had it not been for the compensation limit of £85,000, the FCA said total compensation payable to customers would have been approximately £14.6mn.
This means victims of unsuitable advice were shortchanged £1.3mn.
The FCA’s executive director of enforcement and market oversight, Mark Steward, described the quality of advice given by Pembrokeshire Mortgage Centre as “woeful”.
He added that the firm advised hundreds of consumers to give up valuable defined benefit pensions without any adequate justification or rationale, using “generic, templated advice not tailored to the specific circumstances of their customers” while earning fees in doing so.