A Labour MP has questioned whether the Financial Conduct Authority (FCA) is wise to allow financial advisers to calculate their own losses concerning unsuitable defined benefit (DB) pensions advice.
Nick Smith, the MP for Blaenau Gwent, wrote to the FCA on 11th January, highlighting concerns that the planned redress scheme for British Steel Pension Scheme (BSPS) members could lead to steelworkers losing out on compensation they’re entitled to.
In December 2021, the FCA announced a consultation concerning a redress scheme. Redress would be limited to BSPS pension transfer advice given between 1st March 2017 and 31st March 2018. The FCA proposed that firms review the advice they had provided to BSPS members, decide if the advice provided was unsuitable, and, if necessary, pay compensation.
Smith’s primary concern is that allowing advisers to assess their own transfer advice and calculate compensation amounts to them being asked to mark their own homework. It seems implausible that a significant number of advisers wouldn’t find the advice they had given to be suitable to avoid having to pay compensation to BSPS members.
Smith’s letter read: “It appears that IFAs are being asked about the quality of their own advice.
“Given we know from the FCA’s own analysis that an exceptionally high amount of unsuitable pension transfer advice was given in BSPS cases, any analysis of the quality of advice or calculation of losses done by the IFAs themselves, where the guidance provides room for interpretation, would be questionable and could result in IFAs benefiting, rather than the steelworkers affected.”
MP wants FCA to act quickly
Smith also wants the FCA to quickly implement the redress scheme for BSPS members and is concerned that many won’t get the compensation they’re due.
Smith highlighted that while it is vital to ensure the details of the redress scheme are suitable and correct, the consultation is not due to end until March 2022. By this date, it will have been between four and five years after the affected period to which the redress will be relevant.
In his letter, Smith said: “By the time the scheme is implemented and advisers agree any compensation, much more time will have passed which is delaying justice for steelworkers for far longer.”
Smith is further concerned by the 13-month timeframe for eligible claims as well as the narrowing window for making a claim. He questioned why BSPS members who may have potentially been mis-sold a pension transfer outside of 1st March 2017 and 31st March 2018 won’t be covered by this, or apparently any other, redress scheme.
Smith said: “This could especially hit those who were mis-sold before 1st March 2017 who are also at the greatest risk of being timed out by the six year limit to complain.”
Smith wants the FCA to take “the toughest possible action should any company not comply in full with your instructions and guidance.”
He further added: “For the proposed redress scheme to proceed successfully, advisers will need to be transparent and not seek to deter customers from pursuing complaints.”
The MP has also requested a meeting with the FCA’s Sheldon Mills to discuss the issues he highlighted in his letter in greater detail.
What is the BSPS scandal?
In 2017, BSPS members were asked to decide whether they wanted to:
- Move their BSPS DB pension to a new plan, BSPS2
- Stay in their existing fund, which then moved to the Pension Protection Fund as part of a restructuring of pension liabilities
- Transfer out of the BSPS entirely
Consequently, nearly 8,000 BSPS members transferred out of their old pension, with the total transfer value amounting to almost £3 billion.
However, concerns about the suitability of many of these transfers quickly reared their head. The FCA, for its part, promptly intervened, which led to some firms deciding to no longer provide pension transfer advice and others going out of business. According to the FCA, the number of firms offering DB advice following its crackdown is now 1,200, down from 3,000 in 2018.
In recent months, the FCA, in conjunction with the Financial Ombudsman Service, the Financial Services Compensation Scheme, and MoneyHelper, has held meetings with individual steelworkers to discuss their situation and offer help.
Worried that your BSPS pension transfer was mis-sold? LawPlus can help you!
Did you transfer out of your BSPS pension after receiving advice between 1st March 2017 and 31st March 2018? If so, you could be entitled to compensation. Contact us today for a free, no-obligation review of your pension transfer and discover how much cash you could get back.
Transferred out of a BSPS pension outside of these dates? Your pension transfer may still have been mis-sold! You have nothing to lose by getting us to review your transfer, so even if you received advice or transferred outside of these dates, get in touch!