On 12 May 2023, the FCA publicly censured the financial advisory firm, Lighthouse, for providing unsuitable advice to customers to transfer out of occupational defined benefit pension schemes, including the British Steel Pension Scheme (the BSP Scheme).

The FCA found that Lighthouse breached Principle 9 (a firm must take reasonable care to ensure the suitability of its advice and discretionary decisions for any customer who is entitled to rely upon its judgment) during the 4-year period from 1 April 2015 to 30 April 2019. 

The regulator chose not to impose a financial penalty on Lighthouse for two key reasons: (1) Quilter (who had acquired Lighthouse in June 2019) “promptly and proactively” paid or offered to pay redress to all impacted customers which, by the end of April 2023, stood at over £23 million, far in excess of the fees received; and (2) the “very high levels of cooperation” from Quilter during the FCA’s investigation, despite the misconduct occurring prior to the acquisition. 


Lighthouse was acquired by Quilter Financial Planning Limited in June 2019 and from this point onwards, Quilter was responsible for the defined benefit pension transfer advice provided by Lighthouse.

In July 2019, the FCA carried out an assessment of suitability of the defined benefit pension transfer advice provided by Lighthouse to its customers during the period October 2015 to October 2018, which found that 29% of the customer files assessed as part of the sample review had received unsuitable advice, all of whom were members of the BSP Scheme.

In December 2020, the FCA required Lighthouse to appoint a skilled person to conduct a past business review in relation to: (i) defined benefit pension transfer advice that it had provided to members of the BSP Scheme between 1 April 2015 and 27 January 2020; and (ii) a sample of defined pension transfer advice it had provided to other members during the same period.   Following this review, the FCA found that (i) 53% of the advice provided to the BSP Scheme members was unsuitable; and (ii) 28% of the advice provided to the members of other schemes was unsuitable.

On 28 November 2022, the FCA published a policy statement setting out the final rules for a consumer redress scheme for former members of the BSP Scheme. The rules required firms to assess any advice they gave to BSP Scheme members to transfer out, and to pay redress to members who transferred out after receiving unsuitable advice to do so using the FCA’s redress calculator. The FCA’s redress scheme came into effect on 28 February 2023.

FCA findings

The FCA found that, in light of its review in July 2019 and the subsequent skilled person’s review, Lighthouse had failed to take reasonable care to ensure the suitability of its defined benefit pension transfer advice.  In particular it failed to: 

  • properly demonstrate that the transfer was in the customer’s best interests;
  • give due consideration to whether the customer could financially afford the risks involved in the transfer; and
  • challenge the customer’s stated preferences, and appropriately question or test their rationale and motivations. 

The Final Notice highlights the following factors in particular:

  • many Lighthouse customers were relying on their BSP Scheme pension as their main source of retirement income;
  • many Lighthouse customers were in a vulnerable position due to uncertainty around the BSP Scheme and Lighthouse should have therefore taken more care in giving the advice; and
  • Lighthouse did not challenge the members’ reasons for wanting to transfer out of the BSP Scheme, nor consider alternatives to transfer, nor evidence why the transfer was in the customer’s best interest.

The regulator considered the combined effect of Lighthouse’s failings created a significant risk of unsuitable advice, which was serious because: (1) the customer’s need for accurate and adequate information when deciding to transfer out of a defined benefit pension scheme is high; and (2) this decision can affect customers for the rest of their lives – meaning that the transfer could have a detrimental impact on customers who were already in a potentially financially vulnerable position.

Sanction – public censure

Whilst the FCA found that Lighthouse had benefitted from the revenue received in relation to the unsuitable advice and that its conduct was sufficiently serious to justify a substantial penalty, the FCA also had particular regard to the following factors:

  • on behalf of Lighthouse, Quilter had paid or had committed to pay over £23 million to customers who had received unsuitable advice;
  • as part of its redress methodology Quilter agreed to include an additional allowance to enable customers to obtain further advice at no cost, which the FCA said “went above and beyond” what Quilter was required to do by the FCA Redress Calculation Guidance at the time;
  • the degree of cooperation from Quilter during the FCA’s investigation, namely:
    • voluntarily providing to the FCA an investigation report produced by external legal counsel and underlying materials over which it did not attempt to assert privilege, which the FCA said expedited its investigation;
    • continuing to employ a key employee solely to assist with providing information to the FCA in relation to its investigation;
    • proactively bringing additional information to the FCA’s attention to assist with the investigation;
  • investments have been made into Lighthouse’s control environment to ensure similar misconduct does not occur in the future. 

As a result Lighthouse was publicly censured, avoiding a financial penalty.  The FCA highlighted in a recent speech by Therese Chambers, Joint Executive Director of Enforcement and Market Oversight, the “highly unusual” decision by the FCA not to impose a financial penalty on Lighthouse because of Quilter’s “exemplary” cooperation with the FCA and its proactive approach to redress, which went beyond the FCA’s expectations.