The Financial Conduct Authority (FCA) is consulting on proposals for a redress scheme for former members of the British Steel Pension Scheme (BSPS) who were given unsuitable advice to transfer out of the scheme and suffered financial loss.
The BSPS, a large defined benefit pension scheme, had to be restructured after Tata Steel faced financial difficulties in 2017. Almost 8,000 members decided to transfer their pension benefits out of the scheme to a defined contribution pension arrangement after taking advice from independent financial advisers. The FCA estimates that the advice given was unsuitable in 46% of all BSPS cases and many of the members lost significant sums of money as a result.
Under the proposals published for consultation on March 31, 2022, the FCA wants to require firms who advised BSPS members to transfer out of the scheme to:
- Review their advice,
- Identify whether or not it was suitable,
- Tell members the outcome of their assessment, and
- Calculate and pay compensation to members where needed.
The redress scheme would cover members who received advice between May 26, 2016 and March 29, 2018.
The FCA also recently sent a “Dear CEO” letter to firms who gave pension transfer advice to BSPS members in that period. The letter sets out the actions the FCA expects these firms to take immediately. In particular, firms must have adequate financial resources, should retain assets for a potential redress exercise and should not try to avoid their responsibilities. This letter replaces a similar letter issued in December 2021.
The FCA’s consultation closes on June 30, 2022, but responses to questions on calculating redress are needed by May 12, 2022.
If the scheme goes ahead, the FCA intends to publish a policy statement with final rules in autumn or winter 2022. The aim is for the scheme to be in place by early 2023 to allow consumers to receive compensation in late 2023 or early 2024.