FCA has published its final rules setting out how the redress scheme for former members of the BSPS who were given unsuitable advice on transferring out will operate. There have been no significant changes following FCA’s consultation – including in relation to the many criticisms respondents raised on the DBAAT tool.
The rules require all relevant customers to be contacted by their adviser between 28 February and 28 March 2023 and then the firms must review advice by the end of September and calculate redress by the end of 2023. The initial letter must explain that the firm will review the transfer advice unless the customer decides to opt out or, where appropriate, that the case falls outside the scheme and so the advice will not be reviewed, but the customer may still be able to complain.
They will need to use an FCA tool to calculate redress payments where due, and will have to provide FCA with details of all cases the firm has rated as suitable so that FCA can check whether consumers would like an independent FOS review of the advice.
Redress is intended to put consumers back in the position they would have been in had they remained in the DB scheme. Of course, it is not possible for the pensioners to be reinstated in the scheme, so the rules calculate redress on the basis of what would be needed to top up a personal pension so that the consumer can purchase an annuity at retirement that provides an income similar to what they would have received by staying in the BSPS. FCA currently expects the average redress payout to be £45,000.
FCA is also consulting on extending the temporary rules it made on asset retention, so that they will apply until firms have resolved all relevant cases.
As a final part of the package, FCA has written to insurers who have provided, and intermediaries that have arranged, PII cover for firms that gave DB pension transfer advice to BSPS members between 26 May 2016 and 29 March 2018. The letter notes that adviser firms will want to have certainty about the extent of their cover, and sets out FCA’s expectations on how insurance firms should deal with requests from advisers seeking to understand the potential for any PII cover to respond. If the insurance firm thinks the cover would not respond, it should explain why. Where an adviser makes a claim, FCA expects notifications and claims to be handled promptly and fairly.