Following a long-running consultation, the Financial Conduct Authority (FCA) has confirmed a £49 million redress scheme for steelworkers affected by the British Steel Pension Scheme (BSPS) transfer scandal.
The redress scheme will begin paying compensation in February 2023, affecting nearly 350 financial advisers and over 1,000 former BSPS members. The FCA also said that it expects around 40 firms to go out of business due to the redress scheme, meaning affected members’ compensation claims will be dealt with by the Financial Services Compensation Scheme (FSCS).
The average compensation payout is expected to be £45,000, lower than the previously predicted £60,000 due to falling annuity rates. As such, the compensation gap highlighted by the National Audit Office earlier this year may be far less than previously predicted or potentially wiped out entirely. However, there is still significant potential for members with larger pension pots to miss out due to the FSCS compensation cap of £85,000.
While the purpose of the redress scheme is to return affected members to the position they would have been in had they remained in their defined benefit pension, this may not happen for everyone should their adviser go bust.
Former BSPS members who are owed redress will have the option of receiving a compensation lump sum or having it added to their new personal pension.
FCA extends asset retention scheme
The FCA has taken steps to try and ensure redress is paid by announcing an extension to its asset retention scheme. The scheme exists to prevent BSPS-linked advisers from disposing of assets or taking cash out of the business to avoid paying redress. The extension will see the FCA’s asset retention rules remain in place on advisers until they have fully resolved all their BSPS cases.
At a press conference announcing the redress scheme and discussing the extension of the asset retention scheme, the FCA’s director of consumer investments, Therese Chambers, said: “What we have seen, unfortunately, in a number of firms through this period has been the removal of substantial amounts of a firm’s assets, presumably to avoid those funds being paid to steelworkers by way of redress.
“We expect those [asset retention rules] to continue for the period of the redress scheme.”
While the announcement of the redress scheme is a step forward for BSPS members, it remains controversial. For example, the scheme still requires advice firms to:
- Identify the consumers they gave BSPS transfer advice to
- Undertake a suitability assessment on these cases
- Calculate the redress payable if they find they provided unsuitable advice to transfer
MPs described this process earlier this year as akin to letting advisers “mark their own homework,” but it is nevertheless the model the FCA has chosen to follow.
Did you transfer out of the BSPS after receiving unsuitable advice?
If so, and you’re yet to make a complaint or be contacted by your financial adviser about your transfer, LawPlus can help.
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