The Financial Conduct Authority (FCA) has set in motion plans to compensate former members of the British Steel Pension Scheme (BSPS), who were given unsuitable advice to transfer out of their guaranteed pension by financial advisers.
The regulator expects £71.2mln of compensation to be paid to an estimated 1,400 former steelworkers who exited the benefit plan, a statement from the FCA said. This follows its announcement of plans for a redress scheme for steel pensioners in December last year.
Almost 8,000 members transferred out of the scheme around the time of the 2017 restructuring, with the average individual losing £82,600, according to a report from the National Audit Office in March this year. The FCA said almost half or 46% of the advice it reviewed relating to BSPS was unsuitable.
Sheldon Mills, executive director for consumers and competition at the FCA, said: “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 will publish rules setting out how advisers must determine if they gave unsuitable advice and the compensation that must be paid.
It warned firms not to avoid their responsibility of paying compensation to the affected former pension scheme members, failing which ”strong action” will be taken against them. The FCA noted that it is investigating 30 individuals or businesses related to the BSPS and has already frozen the assets of one firm.
The scheme, covering workers who transferred out between 26 May 2016 and 29 March 2018, is expected to be in place by early 2023. Individuals will begin receiving compensation from late 2023.
The FCA has launched a consultation on the latest plans, which will be open until 30 June 2022.