A steel works
(Picture: PA Archive)The Financial Conduct Authority said on Thursday it would pay £71 million in compensation to members of a British Steel pension scheme (BSPS) who were wrongly advised to give up their guaranteed pensions.
The FCA found that almost half of the advice given mainly by financial advisors relating to BSPS was “unsuitable”. The FCA said it will publish rules setting out how those advisers must now determine whether they gave unsuitable advice and whether they must pay compensation.
A report by the National Audit Office published earlier this month that said that when the BSPS was restructured after British Steel’s then-owner got into financial difficulty around 2017, nearly 8,000 members chose to transfer their benefits out of the scheme. The NAO said 95% of these decisions were informed by independent financial advisers.
In 2018 the work and pensions select committee found that unscrupulous financial advisors aided by “parasitical so-called ‘introducers’” targeted steelworkers who were members of BSPS for “dubious personal gain”. Defined benefit pensions like the original BSPS scheme are usually massively more beneficial to their members than defined contribution schemes.
The committee said the British Steel pensions ended up in “unsuitable funds characterised by high investment risk, high management charges and punitive exit fees”.
The FCA said that, if confirmed, consumers will start to receive compensation from late 2023.
Sheldon Mills, executive director for consumers and competition at the FCA, said in a statement: “The circumstances around British Steel Pension Scheme transfers were exceptional, with former members receiving significantly higher levels of unsuitable advice compared with other cases.
“We want individuals who lost out financially after receiving unsuitable advice to receive compensation through our scheme.”
The FCA regulates over 50,000 financial services firms and is responsible for supervising financial advisers, including the regulated advice provided to BSPS members.
