Laura WilesThe Financial Regulators Complaints Commission has issued its final report on allegations from former members of the British Steel Pension Scheme against the FCA.
The report concluded that the handling of BSPS transfers caused serious consumer detriment, and the FCA failed to protect affected former members from foreseeable harm.
In particular, the Commissioner found that the FCA was aware of significant risks in the defined benefit (DB) pension transfer market well before the BSPS restructuring took place, but failed to:
- Take preventative action before BSPS advice was given to prevent foreseeable harm by strengthening the regulatory framework or otherwise enhancing consumer protection;
- Intervene effectively during the “Time to Choose” period during which unsuitable advice was given to BSPS members; and
- Respond with urgency once the damage had subsequently materialised.
The report describes these as “not isolated misjudgements, but a series of regulatory failings”.
The Commissioner upheld a complaint that the FCA was “consistently behind the curve” in anticipating, preventing and responding to the unsuitable financial advice being given. A second complaint alleged that the FCA had not been sufficiently proactive or timely in using its enforcement powers. In this matter, the Commissioner was not presented with evidence indicating undue delay with respect to the firms the FCA did take action against, but as the FCA had not specifically assessed the overall effectiveness of its actions across all firms providing BSPS advice, the Commissioner was unable to make findings on this point.
The FCA has published its response to the report, outlining its sympathies for the former members of the scheme who lost money after receiving unsuitable advice. The statement also highlights that there have been 4 independent reports into the BSPS since 2018, and the FCA have accepted and implemented several of their recommendations. These improvements include: close collaboration between the FCA, The Pensions Regulatory, Pension Protection Fund and the Money and Pensions Services; increased data collection in relation to pension transfers; a new tool so consumers can check if they may have received unsuitable DB pension transfer advice; and a ban on contingent charging for DB pension transfers to reduce conflicts of interest.
The statement also notes that recent evaluation shows these changes have helped reduce the scope for harm and shift the market away from advice models that put advisers’ interests ahead of those of underlying consumers. At least £106m in redress has been offered to 1,870 former BSPS members.