The Financial Conduct Authority (FCA) has imposed a fine on British Steel advisory firm Pembrokeshire Mortgage Centre (PMC) for providing unsuitable financial advice on defined benefit (DB) pension transfers.
PMC, which is now in liquidation and traded as County Financial Consultants, will need to pay a penalty of £2,354,331 ($2,866,163, €2,737,734).
The unsuitable advice in question was provided to 420 customers, nearly two-thirds of whom were members of the British Steel Pension Scheme (BSPS). The remainder were members of other DB schemes, the regulator said.
In 93% of cases, clients were advised to transfer out of their DB pensions – with the total value of transferred funds being around £123m. PMC received more than £2m in fees as a result.
On average, the transfer value per British Steel customer was approximately £314,000, while slightly lower for other DB members at £293,000.
The FCA added that many of the firm’s clients were in vulnerable situations, due to the uncertainty surrounding the future of BSPS and they had little time to make a decision on their retirement savings.
But the regulator said they did not receive “the quality of advice they needed to make an informed decision”. In 60% of cases, PMC provided unsuitable advice, the FCA said.
‘Woeful’ advice
Mark Steward, executive director of enforcement and market oversight at the FCA, said: “Pembrokeshire Mortgage Centre advised hundreds of consumers to give up valuable defined benefit pensions without any adequate justification or rationale, using generic, templated advice not tailored to the specific circumstances of their customers while earning fees in doing so.
“The quality of advice seen here was woeful. The failings were particularly egregious in the context of the British Steel Pension Scheme, where customers were in an unusually vulnerable position. The FCA’s investigation into the involvement of others in these matters remains ongoing. Any consumers who were advised to transfer should contact the Financial Services Compensation Scheme (FSCS) to see if they are owed redress.”
The watchdog said that PMC’s failings included the provision of generic suitability reports not tailored to the clients’ specific circumstances which contained “contradictory, misleading and confusing statements”.
The advice company also did not have adequate resources to deal with the surge of cases caused by BSPS, which impacted the quality of the advice provided even further. Several customers were advised to transfer out even though they relayed on the guaranteed income for their retirement and couldn’t afford the risk of transferring out.
As PMC is currently in liquidation, the FCA said it will give preference to creditors – some of whom may be consumers as well – ahead of its financial penalty “to maximise funds available for redress”.
Payouts
As of 30 November 2022, the FSCS had already paid out more than £13.3m in compensation to 213 eligible customers. The overall FSCS uphold rate for claims against PMC was 88%.
But the FCA added that, had it not been for the lifeboat scheme £85,000 redress limit, the total figure would have been around £14.6m.
