In December 2021, the FCA’s Board had asked for a consultation to be prepared on a redress scheme under s404 of the Financial Services and Markets Act for former members of the British Steel Pension Scheme (BSPS) who received defined benefit pension transfer advice.
In March 2022, the FCA published in its Consultation Paper CP 22/6 proposals for a compensation scheme for former members of the BSPS who received unsuitable advice to transfer out of the fund.
This redress scheme will be limited to BSPS transfer advice. BSPS is a highly exceptional case, with the FCA’s analysis indicating significantly more unsuitable advice (47%) than was observed in reviews of higher-risk firms in non-BSPS cases (17%).
It is proposed that the redress scheme will cover BSPS members who transferred out between 26 May 2016 and 29 March 2018. If it goes ahead, the FCA will publish rules setting out how advisers must determine whether they gave unsuitable advice and whether they must pay compensation. Independent checks and monitoring will be put in place to ensure that firms comply with the rules and that consumers can be confident in the outcome of the review.
If confirmed, the scheme is expected to be in place by early 2023, with consumers starting to receive compensation from late 2023
In a Dear CEO letter issued in December 2021, the FCA had set out its expectation that firms in the scope of a potential redress scheme (that is, those that gave BSPS advice between 1 March 2017 and 31 March 2018) should retain assets and should not try to avoid their regulatory responsibilities. Specific areas covered by this letter included;
The FCA warned firms that it will take action if a firm attempts to avoid redress liabilities. This warning was followed up in February 2022 when the FCA stopped AJH Financial Services Limited, a firm that advised on transfers from the BSPS, from disposing of assets without FCA permission. The FCA was concerned that AJH did not have sufficient financial resources to pay potential redress claims and appeared to have paid out dividends rather than retaining the assets.
The FCA commented, in relation to AJH, that “We will act to prevent firms from disposing of assets which may be required to pay redress. We will look to impose requirements where firms have not acted in accordance with the expectations in our Dear CEO letter or have attempted to phoenix or put in place structures to avoid potential redress liabilities. We will continue to monitor firms who have advised on BSPS transfers and take action where necessary”
A further Dear CEO letter along these lines was issued to firms in March 2022.
The FCA sent a questionnaire to around 2,500 advice firms in January 2022, asking for details about defined benefit pension transfer advice given to British Steel scheme members, The questionnaire was part of the FCA’s preparation and further analysis of advice given to members of BSPS ahead of its creation of the redress scheme.
It read: “In December 2021 we announced that the Board of the FCA had asked for a consultation to be prepared on a redress scheme for former members of the British Steel Pension Scheme (BSPS) who transferred out of the scheme. As part of our preparation, we are undertaking further analysis of advice given to members of the BSPS between 29 March 2016 and 31 March 2018. All firms who have received this email should complete the questionnaire, whether you have advised on the British Steel Pension Scheme or not.”
If a firm said it did not provide advice, the questionnaire ended and simply required firms to confirm that the answers given were true and to sign the form. If a firm said it did provide advice, it needed to answer further questions. The form had to be submitted by February 10 2022.
If you’d like to know more about how we can help you with your back book reviews of any defined benefit pension transfer advice cases, or with any other regulatory compliance issues, our specialist team is here to help.
Contact us today on 0207 436 0630 – or email info@thistleinitiatives.co.uk.