The Financial Conduct Authority has said it expects the British Steel Pension redress scheme to be in place by early next year, provided it receives all the relevant approvals.
Giving evidence to MPs on the public accounts committee Sheldon Mills, executive director of consumers and competition at the FCA, said the regulator should have a final decision on the redress scheme by this autumn.
He said: “We’ve consulted on the redress scheme as of March [and] we have to consult on this to hear from others on the other side of this in terms of the financial advisors themselves.
“They have concerns over what we're consulting on sp we have to consult them. We expect to have a final decision in the autumn and then we expect, if that is a go, in early next year in January or February next year there will be a redress scheme in place.”
Responding to questions raised by MPs on the FCA's delay, Mills argued the regulator was not behind the curve because it took “a particular supervisory approach to this”.
“This was to go out and look for the firms who were at highest risk of either default or providing unsuitable advice and then there was a process of past business reviews,” he said.
“What that asked those firms to do was to undertake, sometimes with the benefit of a skilled person, sometimes on their own back, a review of an assessment of the advice that they've given, and that has proved to be partially successful in understanding and being at the heart of some of the evidence base that we have for entering into a consultation on the redress scheme.”
Meanwhile Nikhil Rathi, chief executive of the FCA, said the regulator had learned some of the lessons from the BSPS saga and recognised there had been challenges, which had serious consequences.
'Widely optimistic'
When looking at the FCA's proposed redress scheme, Tim Fassam, director of government relations & policy at adviser trade body Pimfa, told MPs there was a case to consider on whether there should be a broader Treasury-run compensation framework along the lines that it introduced for London Capital & Finance.
Fassam gave evidence to MPs alongside Rich Caddy, former member of BSPS and Philippa Hann, managing director financial litigation at Clarke Willmott LLP, in a first session ahead of the regulator appearing before the committee.
Fassam said: “I think it we need a solution that ensures that all parties that have played a role in causing the difficulties for British Steel pensioners are contributing in a meaningful way and we have to look across the piece at where the challenges have been including The Pensions Regulator, [the Department for Work & Pensions], the Treasury, the FCA.
“Where there has been egregious behaviour from a financial adviser, that advisory firms should be paying the compensation, where they are out of business there are processes in place to deal with the via the FSCS but we think there certainly is a case to consider about whether there should be a broader Treasury run compensation framework along the lines that they introduced for our LCF where the principle of a an issue where there was a view that there was a regulatory failure as well as a failure of behaviour.”
He argued that previously, there were unacceptable limits on the compensation available to some of those affected, and stated that a government-run compensation scheme was appropriate for those individuals that did not neatly fit into the existing compensation framework.
Likewise, Hann said the redress scheme was “widely optimistic" and stated that there are significant issues with the insurance position in the industry and that certainly “needs a fine tooth comb going through it”.
“I am concerned that most of those firms will fall insolvent and the weight of the compensation will fall on to the FSCS,” she said. “It is worth adding that there are significant differences between those who saw compensation at an early stage and those people ought to be compensated in addition and should not be excluded from the redress scheme.”
Hann explained that those who were seeking redress following a letter from the FCA in 2020 would have effectively been penalised because they would have received lower sums in compensation.
Meanwhile, Caddy also argued that the redress scheme has already taken too long.
“Only 25 per cent of steel workers are making complaints because they believe that if there was something wrong with the advice that they received, the FCA would have taken their adviser out of the market,” he said.
“It’s time consuming again, we're already five years in which we're still looking at maybe another two years before claims start getting paid out. Some people might never see that I think we need swifter action on this now.”
He argued that it needs pushing along faster and there is a need for more resources to get things settled there.
sonia.rach@ft.com
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