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More than 100 BSPS advice firms hit by FCA asset retention rules

More than 100 BSPS advice firms hit by FCA asset retention rules

Emergency asset retention rules set by the regulator now apply to 101 firms who provided pension transfer advice to former British Steel Pension Scheme members.

The Financial Conduct Authority first announced its emergency rules in April to prevent firms who advised members of the BSPS to transfer from disposing of assets to avoid paying compensation under a consumer redress scheme. 

These emergency rules increase the likelihood that former BSPS members will get compensation directly from firms for any losses they suffered from being given unsuitable pension transfer advice. 

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The City watchdog explained this will help make sure the firms responsible for these redress liabilities meet the cost of them, rather than the costs being borne by other Financial Services Compensation Scheme levy payers.

Today (August 22), the FCA said these rules now apply to 101 firms, with 26 of these firms subject to an asset restriction.  

Under the rules, firms had until May 27 to complete an initial financial resilience assessment (FRA) to establish whether they had sufficient financial resources to meet potential BSPS redress liabilities. 

An initial FRA has been completed by all 101 in scope firms. 

As of this month, 26 of these firms confirmed they failed the assessment and so are subject to an asset restriction. 

The FCA said this number may change as firms must complete the FRA every month or immediately following any material change in their financial circumstances. 

Firms are out of scope of the requirements if they are:

  • a firm that provided BSPS advice during the relevant period to fewer than five BSPS members
  • unlimited partnerships
  • sole traders
  • already subject to similar restrictions
  • dual regulated by the Prudential Regulation Authority (PRA), or
  • subject to an insolvency order 

“We are actively monitoring the financial stability of firms who gave advice to BSPS members,” the FCA said.

In March, the regulator also issued an updated Dear CEO letter in which it emphasised that it expects firms to have adequate financial resources and that they should retain assets for a potential consumer redress scheme. 

The letter also highlighted that firms should not try to avoid their responsibilities for their BSPS advice and should consider the impact that potential BSPS advice liabilities may have on their solvency. 

The rules came into force on April 27, 2022 and will continue until January 31, 2023.

In March, the FCA set out plans to deliver £71.2mn in compensation to former members of the BSPS who received unsuitable advice to transfer out of their pension.

The BSPS case

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 Financial Conduct Authority 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.

In September, the FCA and FSCS travelled to Swansea to meet steelworkers who could be due compensation but were met with mixed feelings, with some showing no interest while others claimed they were unable to book a place.