The FCA will consult on creating a redress scheme to compensate thousands of people advised to transfer out of the British Steel Pension Scheme.
The regulator has written to firms who may be required to pay redress warning them not to try to “avoid their responsibilities” by disposing of assets likely to be needed to fund compensation claims.
Data previously released by the FCA showed 3,427 British Steel members were advised to transfer out of their DB scheme by firms currently active in the market.
Almost half (47%) of those advised to transfer out received advice which “appeared to be unsuitable”. Between October 2018 and March 2020, the average transfer value across the market for members advised to transfer out of their defined benefit (DB) pension scheme was £405,000.
Tom Selby, head of retirement policy at AJ Bell, comments: “Given the apparent industrial scale of pension transfer misselling in relation to British Steel pension scheme members, it was always likely a formal redress scheme would be needed to pay compensation.
“Thousands of British Steel members may have left their defined benefit (DB) pension against their best interests, putting their retirement at risk in the process.
“Although transferring out of a DB pension can make sense in certain circumstances, such a decision needs to be taken with great care and with the member’s best interests at heart. Sadly, it is increasingly clear that this was not the case in relation to many British Steel transfers.”
“While most advisers in the UK provide a valuable service to their clients, the few bad apples involved here have sadly tarnished the reputation of the entire sector. Indeed, negative headlines associated with British Steel will inevitably have hurt trust in retirement saving more generally.
“Among those who are unsure about pensions, scandals such as Robert Maxwell, Equitable Life and now British Steel live long in the memory.
“The focus now has to be on ensuring members entitled to compensation receive it as quickly as possible.
“The regulator has also sent a fairly blunt message to those firms potentially on the hook for DB transfer misselling not to attempt to dodge their responsibilities by deliberately depleting their assets.”