The Financial Conduct Authority has set out plans to deliver £71.2mn in compensation to former members of the British Steel Pension Scheme who received unsuitable advice to transfer out of their pension.
In a consultation paper published today (March 31), the FCA estimated that 1,400 steelworkers will receive £71.2m in redress under the scheme.
Redress represents a transfer to BSPS members who received unsuitable pension transfer advice from the firms that provided that advice, to the extent that they remain in business.
In today’s paper, the FCA said the proposed scheme will cover those who transferred out between May 26, 2016 and March 29, 2018.
Consumers will be excluded from the scheme if they have already received redress, have referred their complaint to the Financial Ombudsman Service, have received a final outcome from a suitability assessment on their case, are an ‘insistent client’ and if they received advice outside the relevant period.
The FCA said some BSPS members might have received transfer advice outside the relevant period that is covered by the proposed scheme and that advice is not included in the scope.
Customers who received advice outside the relevant period can make complaints in the usual way if they think the advice they were given might have been unsuitable.
The FCA has found that almost half (46 per cent) of the advice it reviewed relating to BSPS was unsuitable.
The City watchdog first announced its plans for a redress scheme in December and set out that it will take strong action against impacted firms who try to avoid their responsibilities to pay compensation.
If the scheme goes ahead, the FCA will publish rules setting out how advisers must determine whether they gave unsuitable advice and whether they must pay compensation.
Independent checks and monitoring will be put in place to ensure that firms comply with the rules..
The scheme is expected to be in place by early 2023, with individuals starting to receive compensation from late 2023.
The regulator said for those individuals who received advice from an insolvent business or one which no longer exists, the Financial Services Compensation Scheme will consider claims.
The City watchdog emphasised that consumers can make a complaint now rather than waiting for the outcome of the consultation.
Sheldon Mills, executive director for consumers and competition at the FCA, said: “The circumstances around British Steel Pension Scheme transfers were exceptional, with former members receiving significantly higher levels of unsuitable advice compared with other cases.
“We want individuals who lost out financially after receiving unsuitable advice to receive compensation through our scheme.”
How will the scheme work?
The FCA said the scheme will require firms who gave advice to certain BSPS members to transfer their safeguarded benefits to a DC scheme to assess whether the advice was suitable, and to pay appropriate redress where the advice was not suitable.
The steps that the proposed scheme will require firms to take can be grouped into 3 main phases: pre-scheme checks, suitability assessments and assessment outcomes.