The Financial Conduct Authority plans to consult on setting up a compensation scheme for thousands of British steelworkers facing retirement losses after getting caught up in a multimillion-pound pension scandal.
The move comes after the National Audit Office, the parliamentary spending watchdog, in October said it would investigate the FCA over its handling of the case of the British Steel Pension Scheme (BSPS), dating back to 2017.
The NAO’S probe would be the first such investigation into the UK financial regulator and followed accusations from Welsh MPs that failures and delays in the FCA’s regulation of authorised independent financial advisers (IFAs) contributed to thousands of former members of the BSPS being wrongly advised to give up valuable guaranteed pensions.
The FCA said on Wednesday that it had begun gathering evidence and expected to begin its consultation by the end of March. It said its analysis had found that almost half of BSPS members had received “unsuitable” pension transfer advice, which it described as a “highly exceptional case”.
The FCA said the redress scheme would be structured to require IFAs involved in British Steel pension transfers to review the advice they gave to customers and provide compensation if it was found to be unsuitable. This requirement would obviate the need for affected BSPS members to make a complaint to the FCA to review their case.
The FCA has previously encouraged up to 7,700 former British Steel scheme members to revisit pension transfer recommendations they received and complain if they have concerns.
The regulator warned the IFAs in a letter on Wednesday they should prepare to meet the costs of redress and not sell down assets in anticipation of regulatory action. It said it would act if any of them attempted to avoid their liabilities.
The mis-selling scandal occurred after the Pensions Regulator allowed BSPS to be spun out from Tata Steel, its sponsoring employer, in 2017. As part of the restructuring almost 8,000 steelworkers moved their money into a riskier arrangement, which legally required advice to be taken for sums worth more than £30,000. The House of Commons work and pensions select committee in 2018 said many had been vulnerable to unscrupulous financial advisers.
In September the financial regulator travelled to Port Talbot in Wales, home of the Tata plant, to meet steelworkers suspected of being given bad pension advice alongside the Financial Ombudsman Service and the Financial Services Compensation Scheme.
Independent financial adviser Al Rush, who has campaigned for redress for the steelworkers, cautiously welcomed the FCA’s announcement. “Prevention would have been far better than cure and it’s worth remembering this is a consultation. However slowly things are moving, though, they are moving and that’s to be welcomed,” he said.
He added: “The BSPS financial loss runs into hundreds of millions and it’s retirement income that these non-affluent steelmaking communities desperately need to be retained within, and not siphoned away.”
The regulator imposed its first fine in August on an adviser it described as “seriously incompetent” for retirement savings transfer recommendations to members of the British Steel pension scheme.
