The Financial Conduct Authority has proposed setting up a compensation scheme for former members of the British Steel Pension Scheme (BSPS) who received unsuitable advice to transfer out of the fund.
According to the regulator’s estimates, this would apply to nearly half (46%) of transfer advice cases.
The proposed scheme would cover transfers that took place between 26 May 2016 and 29 March 2019, the FCA said.
If greenlit, 1,400 victims could receive £71.2m ($95m, €86.5m) in compensation – £56.1m more than if the watchdog continues with its current supervisory and enforcement activity, it added.
The FCA will publish rules setting out how financial advisers “must determine whether they gave unsuitable advice and whether they must pay compensation”.
The regulator believes 343 advice firms will be affected by this and they will need to pay a combined total of £9.1m in compliance costs to cover the historical reviews.
For those businesses that will “try to avoid their responsibilities to pay compensation”, the FCA said it will take strong action, as it has already imposed a freezing order on one company.
If members have received unsuitable advice from a firm that is insolvent or no longer exist, they can file a claim with the Financial Services Compensation Scheme (FSCS).
Wait a little longer
The BSPS compensation scheme, if confirmed, is expected to be in place by early 2023 with customers starting to receive redress from late 2023.
But the FCA has urged former British Steel members to make a complaint now if they received unsuitable advice rather than wait for the outcome of the consultation.
Sheldon Mills, executive director for consumers and competition at the FCA, said: “The circumstances around British Steel Pension Scheme transfers were exceptional, with former members receiving significantly higher levels of unsuitable advice compared with other cases.
“We want individuals who lost out financially after receiving unsuitable advice to receive compensation through our scheme.”
