• The FCA has this morning published details of a redress scheme to be established for victims of pension transfer misselling in relation to the British Steel Pension Scheme (CP22/6: Consumer redress scheme for unsuitable advice to transfer out of the British Steel Pension Scheme (fca.org.uk))
• FCA review of a sample of defined benefit (DB) transfer advice given to British Steel scheme members found:
o 41% of recommendations were deemed suitable
o in 14% of recommendations suitability was ‘unclear’ due to a ‘material information gap’
o in 46% of cases the recommendation was unsuitable
• Regulator estimates 1,400 British Steel Pension Scheme members will receive £71.2 million in compensation
• Redress scheme is expected to be in place by early 2023, with consumers starting to receive compensation from late 2023
Tom Selby, head of retirement policy at AJ Bell, comments:
“Given the colossal scale of pension transfer misselling that has occurred, a formal redress scheme for British Steel Pension Scheme members was always likely to be needed.
“Confirmation of this £71.2 million scheme by the FCA today brings those affected one step closer to getting their money back.
“The focus now must be on getting the scheme up-and-running so the estimated 1,400 members who have been badly advised have their compensation claims processed as quickly as possible.
“Although transferring out of a guaranteed defined benefit (DB) pension can make sense in certain circumstances, this is a big decision and one where good quality advice with the member’s interests at its core is absolutely crucial.
“It is clear that far too many British Steel scheme members were badly let down in this regard.”
Bad apples
“While the vast majority of advisers in the UK provide a hugely valuable service to their clients, the few bad apples involved here have sadly tarnished the reputation of the entire sector.
“Aside from the direct impact on members who were badly advised, the scandal will also inevitably harm trust in retirement saving more generally.
“Sadly, scandals such as Robert Maxwell at the Daily Mirror, Equitable Life and now British Steel tend to live long in the memory.
“As a result, the wider pensions industry will now need to redouble efforts to ensure people aren’t put off saving for retirement altogether.”
