PIMFA has reiterated its demand that members of the British Steel Pension Scheme (BSPS) get compensation through the Pension Protection Fund (PPF).
PIMFA has urged the Financial Conduct Authority (FCA) to make sure that steelworkers who were improperly transferred out of the scheme are given the chance to be put back in the position they would have been in had they never left, in response to the Public Accounts Committee (PAC) report into the scandal, which was published today (21 July 2022).
According to PIMFA, which concurs with many of the PAC report’s findings, the FCA’s response was insufficient given the clear priority it has given to guaranteed income through its regulatory strategy to date. PIMFA requested that former members of the BSPS receive compensation through the PPF earlier this month as part of its response to the FCA’s consultation on its consumer redress programme.
Simon Harrington, Head of Public Affairs at PIMFA commented: “The PAC’s findings make for sobering reading and starkly detail the reality of thousands of people who have been let down with poor advice and deficient regulatory oversight – both of which should have been in place to protect them.
“We have never sought to downplay the role that unscrupulous firms played in wrongly advising members to transfer out their benefits. But it is equally the case that this level of poor practice was known and little was done by the FCA to correct it.
“We accept a number of the failings of regulation are a direct result of pension freedoms still being in their infancy and we remain strongly of the belief that seven years after their implementation there remains a significant disconnect between the way in which pension freedoms are regulated and the way in which they were originally conceived.
“As we set out to the FCA, if it believes the provision of guaranteed income significantly outweighs the flexibility that pension freedoms encourage, it should make this point clear. Without this level of clarity from the regulator, firms will remain uncertain about their responsibilities going forward.
“We strongly believe those who have received demonstrably poor transfer advice to give up their guaranteed benefits should be given the opportunity to be put in the position they would have found themselves in had they not transferred out. As we set out in our response to the FCA’s recent consultation, we do not believe its proposals do that – they simply perpetuate a cycle of individuals being given cash lump sums where a guaranteed income would, in the view of the FCA, be preferable. We believe that this should be addressed and the FCA should gear its redress scheme towards reinstatement either through the PPF as we have suggested, or another vehicle.
“This view is born not just from a desire to ensure people are put back in the position they would have found themselves in but also a recognition as highlighted by the Committee that the current compensation arrangements will not protect consumers – especially those who will be forced to call on the Financial Services Compensation Scheme (FSCS). As we set out in our evidence to the Committee, we consider it right that consideration is given to how those individuals can be compensated at the right level, if their individual claims fall on the FSCS. We would point to the LCF Bill – a recognition of regulatory failure which contributed to significant consumer losses – as a potential avenue for the government to pursue to ensure that those deserving get fair compensation which is not restricted by the FSCS cap.”