Nearly half or 46 per cent of British Steel Pension Scheme (BSPS) members received unsuitable advice, according to the Financial Conduct Authority (FCA).
The FCA’s redress scheme aims to ensure that those who were misled are not left financially disadvantaged. It estimates that 1,744 former BSPS members received unsuitable advice but were not offered redress payments or received less compensation than projected due to lower annuity costs.
Only £8.7 million of the initial £71.2 million estimate for the FCA’s redress scheme has been paid. In contrast, almost £100 million was distributed to 1,800 claimants before the scheme’s launch while steelworkers who applied later have lost £62 million.
The cost of securing a guaranteed retirement income through an annuity has decreased, suggesting that the premium necessary to match the benefits they would have received from BSPS is now lower or zero. As a result, individuals who have more in their defined contribution (DC) pot than the comparable BSPS benefits may not be compensated, despite receiving unsuitable advice.
The FCA notes that compensation may be lower for those assessed later due to changes in market conditions and that some individuals have not yet made claims to the Financial Services Compensation Scheme (FSCS). Currently, 200 claims are working their way through the redress scheme.
Broadstone head of redress Brian Nimmo says: “Many ex-British Steel Pension Scheme members will have entered the redress scheme with expectations of receiving life changing amounts of compensation. It is unsurprising that they will have been left bitterly disappointed if they received nothing at all. There is a glaring disparity of outcomes depending on when each individual was assessed for loss with those waiting for the FCA’s redress scheme typically receiving far less compensation than those who received compensation earlier.
“Average compensation for those who received it before the FCA’s redress scheme started was over £60,000 whereas for those assessed in the redress scheme, only 360 received any compensation and over 1,700 who had their advice assessed as unsuitable, received no compensation at all. As early as July 2022, it was clear that the changing market conditions meant that redress levels were falling drastically.
“It highlights the importance of keeping consumers informed and up to date with the latest developments as expectations could have been better managed throughout this process. That so many consumers will be potentially disappointed with the outcome risks undermining the laudable aims the redress scheme set out to achieve.”