Members of the British Steel Pension Scheme (BSPS) have lost £18m in compensation according to a report from National Audit Office (NAO).
The report called ‘Investigation into the British Steel pension scheme’ found that members’ losses range from £0 to £489,000, with the average loss for BSPS claims resolved by Financial Services Compensation Scheme (FSCS) being £82,600.
During the schemes’ restructure, almost 8,000 members elected to transfer from the plan to a different pension plan and independent financial advisors were involved in 95 per cent of these decisions. The average transfer value was £365,000, with some transfers totalling more than £1m.
According to the report, The Financial Conduct Authority (FCA), which is responsible for supervising financial advisors, had limited insight into the DB transfer advice market and what was happening in the BSPS at the time of its restructure.
Only 25 per cent (1,878) of members who transferred out of the BSPS have filed a complaint to date. 72 per cent of Financial Ombudsman complaints and 40 per cent of FSCS claims were handled by claims management companies or legal counsel who charged a fee for their services. As a result, some BSPS members may not have received the entire amount of reparation due to them.
The FCA responded by working with the advisor market and pension members to try to limit the most immediate impact, according to the report. It redirected workers to the BSPS and spoke with advisory firms to remind them of their regulatory obligations. It urged BSPS members who were considering transferring out to be cautious, and it assisted in the establishment of a dedicated helpline for members seeking additional information.
The FCA fined £1.3m in fines and is currently conducting 30 more enforcement investigations. In reaction to the BSPS case, it says it has modified its approach to regulating the pensions advisory sector.
The FCA says it has yet to decide whether to adopt a consumer redress plan for BSPS members, which would require all businesses concerned to assess their advice and perhaps give compensation.
NAO head Gareth Davies says: “Although measures have been put in place aimed at improving how the pensions advice market is regulated and to attempt to remedy the financial losses suffered by British Steel Pension Scheme members, it is clear that many people have not been compensated fully under current arrangements. The BSPS case demonstrates the costs and difficulties of remedying failures in financial services and the importance of preventing problems from occurring in the first place.”