FCA censures Lighthouse over 'unsuitable' BSPS advice

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FCA censures Lighthouse over 'unsuitable' BSPS advice

Quilter-owned Lighthouse has been censured by the Financial Conduct Authority over the unsuitable advice it gave those looking to transfer out of defined benefit pension schemes.

In a statement today (May 15), the regulator said Lighthouse Advisory Services gave unsuitable advice to DB pension scheme members, including some in the British Steel Pension Scheme.

The censure refers to advice given by Lighthouse between April 1, 2015 and April 30, 2019, during which the company advised 1,567 customers, of which 262 were BSPS members.

The total value of the defined benefit pension schemes on which Lighthouse gave advice was £655,046,598 with an average transfer value of approximately £325,295 for non-BSPS pension transfer customers and approximately £482,603 for BSPS customers, according to the regulator.

The FCA said Lighthouse had two advisers partially based on site at British Steel’s works in Scunthorpe, and many of those advised by Lighthouse were relying on their BSPS pension as their main source of retirement income.

“Many were in a vulnerable position due to uncertainty around the scheme,” the FCA said.

The advisers did not challenge the reasons for BSPS members wanting to transfer their pension, nor did they properly consider alternatives to meet their retirement objectives, and in some cases they failed to provide evidence as to why a transfer was in the best interest of the members.

As a result, 53 per cent of advice provided to BSPS members was unsuitable, higher than the industry average of 46 per cent. 

Some 28 per cent of the remainder of Lighthouse’s advice during the period to non-BSPS consumers was unsuitable.

Therese Chambers, executive director of enforcement and market oversight at the FCA, said: "Many consumers were wrongly advised by Lighthouse to transfer out of their valuable guaranteed pensions.

"Given the vulnerable position of consumers transferring out the BSPS, the firm should have taken real care in providing advice – it failed to do so.”

We are pleased that the FCA recognised our co-operation with its investigationSteven Levin, Quilter

Quilter bought Lighthouse in June 2019. A year later, the FCA begun an enforcement investigation against Lighthouse for defined benefit transfer advice linked to British Steel members.

The regulator praised Quilter for taking responsibility for the unsuitable advice provided after acquiring Lighthouse in June 2019, after the advice was given.

To date, Quilter has paid £23mn in redress to customers affected by the unsuitable advice, with a further £440,000 offered, to put those customers back into the financial position they would have been in if it were not for Lighthouse’s advice.

The FCA noted that this is “far in excess” of the fees Lighthouse received for the unsuitable advice.

It also said Quilter provided “very high” levels of co-operation during the FCA’s investigation, and has replaced Lighthouse’s senior management team and its internal processes around DB transfer advice.

The FCA said it believes a censure, together with the redress given, to be an appropriate outcome.

Chambers said: “Quilter deserves full credit for taking responsibility for unsuitable advice given before they bought Lighthouse and for the proactive way in which they’ve worked with the FCA to put it right.”

Quilter’s chief executive officer, Steven Levin, said: “Although the relevant advice pre-dated our acquisition of Lighthouse, we have fulfilled our commitment to ensuring that Lighthouse has responded to this situation in a way that is consistent with our values.

"We are pleased that the FCA recognised our co-operation with its investigation and that we have proactively and promptly paid redress to affected customers.”

BSPS background

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 FCA 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.