The Financial Conduct Authority (FCA) announced that emergency asset retention rules now apply to 101 firms which provided pension transfer advice to former British Steel Pension Scheme (BSPS) members.
Some 26 of these firms are subject to an asset restriction.
The UK regulator set up the emergency rules on 25 April 2022 to prevent firms which advised BSPS members to transfer their benefits out of the scheme from disposing assets to avoid paying compensation under a potential consumer redress scheme. The rules came into force on 27 April 2022 and will continue until 31 January 2023.
The emergency rules increase the likelihood that former BSPS members will get compensation directly from firms for any losses they suffered from being given unsuitable pension transfer advice.
This will help make sure the firms responsible for these redress liabilities meet the cost of them, rather than the costs being borne by other Financial Services Compensation Scheme (FSCS) levy payers, and ultimately being passed on to consumers.
Increasing number
There are now 101 firms in scope of the rules. The rules apply to firms who provided pension transfer advice to BSPS members between 26 May 2016 to 29 March 2018, unless specifically excluded.
Firms are out of scope of the requirements if they are:
- a firm that provided BSPS advice during the relevant period to fewer than five BSPS members;
- unlimited partnerships;
- sole traders;
- already subject to similar restrictions;
- dual regulated by the Prudential Regulation Authority (PRA); or
- subject to an insolvency order.
Under the rules, firms had until 27 May 2022 to complete an initial financial resilience assessment (FRA) to establish whether they had sufficient financial resources to meet potential BSPS redress liabilities.
An initial FRA has been completed by all 101 in scope firms. As of this month, 26 of these firms confirmed they failed the assessment and so are subject to an asset restriction.
This number may change as firms must complete the FRA every month or immediately following any material change in their financial circumstances.
‘Actively monitoring’
The FCA said in a statement: “We are actively monitoring the financial stability of firms who gave advice to BSPS members. We issued an updated ‘Dear CEO’ letter on 31 March 2022.
“This underlined that we expect firms to have adequate financial resources and that they should retain assets for a potential consumer redress scheme.
“The letter also emphasised that firms should not try to avoid their responsibilities for their BSPS advice and should consider the impact that potential BSPS advice liabilities may have on their solvency.”
