The Financial Conduct Authority has said firms who provide suitable advice will have "nothing to fear" when it comes to the redress scheme for British Steel Pension Scheme members.
In March, the FCA set out plans to deliver £71.2mn in compensation to former members of the BSPS who received unsuitable advice to transfer out of their pension.
The regulator estimated that this will affect 1,400 steelworkers.
However, some concerns have been raised by advisers about how something is deemed as unsuitable advice in the opinion of the FCA and questioned why there were not any external and independent audits of the FCA’s processes in this matter.
One adviser argued that the FCA has “zero accountability”, questioning how the FCA can act as the “investigator, judge, jury and executioner”.
A spokesperson for the City watchdog said: “Bad advice hits people’s retirement and costs the advisory industry through increased FSCS levies. BSPS saw significantly higher levels of unsuitable advice compared to other cases.
“We would be deeply concerned if any advisers are unsure what is meant by unsuitable advice, particularly as we have provided a significant amount of guidance on how to advise on pension transfers.
“We are consulting widely on how any redress scheme should work. Firms who have provided suitable advice, and are able to demonstrate they have done so, will have nothing to fear from any redress scheme.”
Last month, a group of more than 70 IFAs also raised questions about the regulator’s figures on BSPS transfer advice, warning that the new redress scheme could see 343 firms face insolvency.
FTAdviser understands that the BSPS case saw significantly more unsuitable advice (46 per cent) than observed in reviews of higher-risk firms in non-BSPS cases (17 per cent).
The FCA is proposing to use its powers under section 404 of the Financial Services and Markets Act 2000 for the scheme, which means it must rigorously assess whether the legal test for introducing a scheme is met and carry out a consultation before deciding to proceed.
Firms will have the usual opportunities to challenge findings by the Financial Ombudsman Service and FSCS.
The FCA’s position has always been that transferring out of a defined benefit pension scheme will not generally be in the customer’s best interests.
The BSPS case
During 2017, BSPS members were asked to make decisions about their pensions as part of a restructure of the scheme.
About 8,000 members transferred out of the scheme, with transfers collectively worth about £2.8bn.
But concerns about the suitability of the transfers were soon raised, leading to an intervention from the Financial Conduct Authority that resulted in a number of advice firms – key players in the debacle – stopping their transfer advice service, while others went out of business.
The debacle created a mountain of liabilities, which lawyers believe could end up costing the industry up to £300mn.
In September, the FCA and FSCS travelled to Swansea to meet steelworkers who could be due compensation but were met with mixed feelings, with some showing no interest while others claimed they were unable to book a place.
