The British Steel Pension Scheme (BSPS) saga continues to generate headlines with the redress scheme still in progress, enforcement action ongoing against advisers and complaints against the Financial Conduct Authority (FCA) currently under review. Most recently, as set out in more detail below:

  • the FCA has provided an update on efforts to ensure former members that were given unsuitable advice receive appropriate compensation and those who caused harm are held to account; and
  • the Financial Regulators Complaints Commissioner (FRCC) has provided an update extending the deadline for making complaints about the FCA and its review of those complaints.

Recap

By way of brief recap, in the wake of the restructuring of the BSPS in 2017, approximately 7,700 BSPS members transferred out of the scheme, in some cases relying on unsuitable evidence. In 2018, the FCA commenced its outreach efforts to former BSPS members, encouraging them to complain to their advisers if they thought they may have received unsuitable advice, and engage with the Financial Ombudsman Service (FOS) and Financial Services Compensation Scheme (FSCS) as appropriate. In 2022, the FCA announced plans to introduce a BSPS redress scheme, on the basis that many former members had yet to complain, and the FCA wanted to ensure those affected were provided with the opportunity for the advice they received to be reviewed. Introduced in April 2023, the redress scheme required firms to: (i) review the suitability of their advice, and (ii) pay redress to former BSPS members to whom they had provided unsuitable advice. To date, 6,500 former BSPS members have availed of the scheme, with over £100m in redress having been offered to at least 1,870.

Complaints about the FCA

In spite of its efforts and the introduction of the redress scheme, the FCA has received a number of complaints in relation to its handling of BSPS issues, including that it has: (i) been ‘behind the curve’ in its response, (ii) failed to take steps to protect consumers, (iii) not been sufficiently proactive in using its enforcement powers, and (iv) produced inconsistent outcomes for consumers.

On 22 April 2024, the FCA announced it had concluded its investigation into these complaints, publishing a redacted letter dated 19 April 2024 setting out its decision not to uphold these complaints (the April Letter).

The April Letter stated that the scale of enforcement investigations has been unprecedented, involving around 30 investigations into firms or individuals, resulting in 15 prohibitions for individuals and fines or payments to the FSCS amounting to £8.87 million, with further investigations ongoing (as well as some appeals). The April Letter also confirmed that the FCA had learned lessons from its intervention and engagement on BSPS, including operating in a more joined-up way with the Pensions Regulator and collecting data more regularly from firms providing pension and retirement income products, including the number of defined benefit transfers conducted. In recognition of the length of time it had taken for the FCA to respond to complaints, each complainant was offered an ex gratia payment of £150.

Update on the redress scheme

In respect of the redress scheme, on 24 July 2024, the FCA, the FOS and the FSCS published a BSPS update, reporting that firms had assessed 49% of advice to be unsuitable and 360 former BSPS members had been offered redress of £8.7m, with further claims being processed and expected. The FCA explained that this is lower than expected due to changing economic conditions and the cost of funding a guaranteed retirement income through an annuity has fallen. The FCA has also been updating the information it has published on completed enforcement action which indicates that the two main types of misconduct seen in BSPS cases are:

  • breach of Principle 2 requiring firms or individuals to conduct their business with due skill, care and diligence (i.e. firms/advisers had demonstrated a significant lack of competence in their advice); and
  • breach of Principle 1 requiring firms or advisers to conduct their business with integrity (i.e. they were reckless or dishonest in their dealings with consumers and/or the FCA).

See also our previous blog on enforcement action taken against Lighthouse Advisory Services Limited for its breach of Principle 9, which requires a firm to take reasonable care to ensure the suitability of its advice and discretionary decisions for any customer who is entitled to rely upon its judgment.

Update on the FRCC review of complaints about the FCA

In the meantime, following the  April Letter to complainants, the FRCC has been progressing its review of the FCA’s investigation into complaints. An FRCC update at the start of July indicated that all complaints about the FCA should be received by 19 July 2024, being three months after the FCA issued the April Letter. The FRCC indicated that it aimed to issue its report within three months of 19 July 2024 (although this would depend on the complexity of cases).

On 31 July 2024, the FRCC issued a further update confirming that it has continued to make information requests to the FCA and has extended the window for making complaints about the FCA to 29 August 2024. No update was provided on the timing of the FRCC report beyond stating that “The issuance of the report in a timely fashion is a priority for this office which it will endeavour to do as quickly as it can whilst ensuring a thorough and careful investigation is completed”. A further update from the FRCC is expected on 2 September 2024.

No doubt BSPS members will be watching to see whether the FRCC agrees with the FCA’s conclusions on its own handling of the matter, including that steps it took demonstrated a “tenacious approach” to supervision of relevant firms, that it was not behind the curve in responding and did not fail to take steps to secure an appropriate degree of protection for consumers. Those who have not complained still have a short time to do so.