The Committee’s inquiry into Pension freedom and choice revealed that upwards of £40 million was transferred out of BSPS on the advice of one firm, Active Wealth, alone. Its interim report into the British Steel Pension Scheme described how “many BSPS members were shamelessly bamboozled into signing up to ongoing adviser fees and unsuitable funds characterised by high investment risk, high management charges and punitive exit fees”. The highest transfer value on advice of Active Wealth – which had been on the FCA’s radar for a year - was £790,404, the average was £398,347. Active Wealth claimed that, of 300 BSPS clients they advised, “around a third” acted on their advice to move their savings out of the “gold-plated” BSPS scheme. Active Wealth was then barred from transfer advice and later declared bankruptcy in the face of potential legal action and fines. BSPS members who lost some or all of their savings as a result of this “mis-advising” can be entitled – up to a maximum £50k – to compensation, but over the course of correspondence published today the FCA appears to suggest that they may be being under-compensated.
FSCS' operational independence
In the correspondence, the FCA acknowledges FSCS’ operational independence, but queries the way it has calculated compensation to BSPS members, stating it believes that given the “unique and sensitive” circumstances, FSCS “should” apply its discretionary powers in determining compensation levels. “The difficult decision BSPS members had to make has meant a number of them have sustained losses for which they should be rightly compensated. It is also true that some former members may never be able to recoup their full losses, however it is our view that [FSCS] adopting a different approach in this exceptional case could allow some members to be put back … into the position they should have been in, within compensation limits ….”
In a prompt response to the Chair’s letter the FSCS states that while it is changing its approach to compensation in the BSPS case, and will revisit the 15 compensation claims it has already dealt with, it rules out the FCA’s advice that that it “should” regard this case as “unique”, and waive FCA rules on calculating redress, maintaining that it must apply these rules for consistency.
Commenting on these developments, Committee Chair Rt Hon Frank Field MP said:
"British steelworkers were roundly failed by the official regulators meant to protect their life savings. They were given precious little to guide them through murky waters filled with scammers looking to snatch their pensions – scammers who had little to fear from the FCA’s grossly inadequate action at the time. Now it seems they are being sold short again on what even the FCA calls “rightly” deserved compensation. The FCA has ridden to their defence and urged the FSCS to be more generous, but the FSCS is clinging to rules the FCA says needn’t apply.
"British Steel pensioners deserve more than tinkering around the edges — at the very least, they should be given the maximum possible compensation for the grievous losses they have suffered. The FSCS must think again."
Regulatory failures continue
The Committee has been critical of the information provided to BSPS members facing that “difficult decision”, when they were forced to choose what to do with their pension pots in a febrile situation that Committee Chair Frank Field described as a “honeypot for scammers”: with the FCA “sleepwalking into another misselling scandal” and TPR as “fiddling while Rome burns” in the information and guidance it provided to British Steelworkers,“ when it should have seen this rip-off coming”.
When the Committee’s report on the episode was published, Chair Frank Field said: “Given a choice between two defined benefit options worse that what they had been promised, with precious little support in making that choice, many steelworkers were drawn to the superficially attractive third option” .The “Independent review of communications and support to members of the British Steel Pension Scheme”, commissioned by TPR on the Committee’s recommendation, has just been published. The Committee has received a brief response to the review from TPR, which Chair Frank Field has described as “unfortunately, typically underwhelming.”
TPR's response underwhelming
Frank Field said:
"Meanwhile, TPR’s response in this sorry episode has been unfortunately, typically underwhelming. We can have no more of this “regulation by counting letters sent”. £40 million was lost to the British Steel Pension Scheme on the bad advice of one fee-interested firm. These are vast amounts, life savings lost in a crush of uncertainty and a regulatory vacuum. ‘Clearer, quicker, tougher’ still needs to get much, much better."