The Financial Conduct Authority (FCA) has received information about a small number of firms not including all fees and charges in their defined benefit (DB) pension advice redress calculations, in line with its current guidance.
This comes several months after the UK regulator launched a consultation into how it should change the way it calculates compensation for consumers who received unsuitable pension transfer advice and suffered losses as a result.
The FCA said that recent information it has obtained suggests these firms are “not considering ongoing fund costs and/or fully allowing for ongoing adviser charges” in redress calculations.
Some of these firms “may also be unfairly terminating consumer contracts after consumers make a complaint”, the watchdog added.
The FCA said in a statement: “We are looking into these matters and where we identify firms not calculating redress correctly. We will take action using the full range of our powers which may include appointing an independent professional to check calculations and help consumers get the right redress.
“While we have only seen a small number of firms calculating redress incorrectly, we remind all firms undertaking calculations of the importance of allowing for fees and charges correctly. We have set out further detail to clarify how firms should calculate redress payments in our updated statement on pension transfers redress guidance.
“This is a complex area and firms need to take special care, given the potential for consumers not to receive the compensation they deserve. This is particularly important for any firm calculating redress for former British Steel Pension Scheme (BSPS) members, ahead of a decision by the FCA board on whether to implement a consumer redress scheme.”
Backlash
The FCA has received criticism in recent weeks from several institutions of DB redress including the Society of Pension Professionals (SPP) which highlighted some issues with the FCA’s change to the way it calculates redress for consumers affected by unsuitable pension transfer advice.
It was also threatened with legal action law by firm Hausfeld & Co unless the watchdog fixes several issues identified within the proposed redress scheme for victims of the BSPS scandal.
The law firm brought up several areas that would eventually see scheme members be unfairly undercompensated, such as:
- Financial adviser charges;
- Early drawdown;
- Inflation; and
- ‘Point in time’ redress calculation.
