The price of bad advice: British Steel Pension Scheme compensation
The FCA has published proposals for a compensation scheme for former members of the British Steel Pension Scheme (BSPS) who received unsuitable advice to transfer out of the fund. In addition, it has also issued updates to Guidance for firms on how to calculate redress for unsuitable defined benefit pension transfers.
The FCA review of a sample of defined benefit (DB) pension transfer advice given to British Steel scheme members found:
- 41% of recommendations were deemed suitable.
- 14% of recommendations suitability was ‘unclear’ due to ‘material information gaps’ (MIGs).
- In 46% of cases the recommendation was unsuitable.
It is worth noting that in a high percentage of the files graded by the FCA as unsuitable, there were also significant MIGs, but the FCA deemed there was sufficient there to prove unsuitable.
The FCA estimates 1,400 British Steel Pension Scheme members will receive £71.2 million in compensation.
It is proposed that the scheme will cover those who transferred out between 26 May 2016 and 29 March 2018. If it goes ahead, the FCA will publish rules setting out how advisers must determine whether they gave unsuitable advice and whether they must pay compensation. Independent checks and monitoring will be put in place to ensure that firms comply with the rules and consumers can be confident in the outcome of the review.
The FCA has previously set out that it will take strong action against impacted firms who try to avoid their responsibilities to pay compensation and already has an asset freeze in place on one firm.
The Financial Services Compensation Scheme will consider claims from individuals who received advice from an insolvent business or one which no longer exists.
If confirmed, the scheme is expected to be in place by early 2023, with consumers starting to receive compensation from late 2023.
Consumers can make a complaint now rather than waiting for the outcome of the consultation, information is available on the FCA’s website.
Defined benefit pension transfers are a complex area of financial planning and it important that advice is taken when considering a pension transfer. At The Private Office, we are proud to be Pension Transfer Gold Standard accredited, and all of our qualified advisers are trained to the highest standards to assist with any pension transfer enquiries.
The information in this article is correct as of 21/04/2022.
Please note: Investment returns are not guaranteed, and you may get back less than you originally invested.