PFS challenges FCA approach to British Steel compensation

The Personal Financial Society (PFS) has asked the Financial Conduct Authority (FCA) to reconsider its plans for assessing the amount of compensation owed to British Steel pension scheme (BSPS) members. It has asked the regulator to ditch plans to mandate lump sum compensation. The professional body said lump sum compensation does not address the central issue of BSPS members giving up a guaranteed income. It has called for the Department of Work & Pensions to work with the Pension Protection Fund to ensure clients are re-admitted to the BSPS or admitted to the Pension Protection Fund. It has also called for adviser to have a right of appeal to an independent qualified transfer specialist for a review of the full file and specific circumstances involved creating the recommendation. It said in many cases the Defined Benefit Advice Assessment Tool process is not adequate to address the individual circumstances. It said that advisers giving advice during the FCA’s timeline had no way of knowing what information the BSPS would publish in the future. The professional body has shared information with the regulator about cases where adviser were told by the BSPS that early retirement options could not be issued as the client was not old enough. According to the professional body, this example highlights how the regulator’s assessment tool process is not sophisticated enough to establish a full picture of what could have been reasonably expected from financial advisers working with limited information rather than the full facts in individual cases. Matthew Connell, director of policy and public affairs at the PFS, said: “Clients who received poor quality advice to transfer out of the British Steel Pension Scheme transfers should receive compensation, but we are concerned about the way suitability of recommendations will be assessed and whether a lump sum can ever replace a guaranteed income. “We accept that there were very poor practices among some firms involved in giving advice to British Steel Pension Scheme members. However, the FCA research shows that good advice was also given, which means the review must be fair, proportionate, and operate on a case-by-case basis. “Given that so much of the detriment that applies to British Steel Pension Scheme members relates to a loss of guaranteed income, we do not think it is right for the compensation scheme to mandate those who received poor advice only receive a lump sum. “The regulator needs to rethink their approach and work with the Department for Work & Pensions, The Pensions Regulator plus the Pension Protection Fund to ensure British Steel workers retirements are put back in the financial position they would have been in if they were not advised to transfer out of the British Steel Pension Scheme.” The PFS also raised concerns that the training given to those using the Defined Benefit Advice Assessment Tool is only two days, in comparison with the approximately 13 weeks that it takes to become qualified as a pension transfer specialist. It said that it is ‘highly questionable’ whether people working with the tool training alone are able to consider cases according to the factors that apply to an individual case. It has called on the FCA to amend the timetable to provide for circumstances where advisers had good reason not to seek information on conversion rates. In 2017, many British Steel workers were advised to transfer out of their defined benefit pension into a defined contribution pension, typically a personal pension or a Self-Invested Personal Pension (SIPP). The scandal has attracted national attention and criticism. The FCA recently said that it was looking at 343 advice firms involved in BSPS claims and was expecting to pay out over £70m in compensation. By transferring to a private pension arrangement, the BSPS victims would have potentially lost benefits already built up in the British Steel Pension Scheme.

PFS challenges FCA approach to British Steel compensation

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