Financial Conduct Authority failed to protect British Steel pension scheme members causing “serious financial harm”
21 July 2022
In a report today the Public Accounts Committee finds the Financial Conduct Authority failed to protect British Steel pension scheme members from “unscrupulous financial advisers” who were incentivised by existing fee structures and regulation to provide unsuitable advice that led to around 7,800 steelworkers losing an average £82,600 in life savings, with some losing up to £489,000.
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The FCA was “consistently behind the curve” and despite being aware of the potential risks to consumers caused by new ‘pension freedoms’ in 2015 it “failed to take preventative action to protect consumers”.
By 2017, the FCA still “did not know what was happening in the DB pension transfer market or the BSPS case”. It had “inadequate oversight of the firms involved”, and only later found out that “47% of cases the advice provided was unsuitable”.
The FCA’s response was “focussed on gathering further evidence and issuing letters to firms, rather than enforcing against non-compliance, to date it has issued only one fine.” The complaints-based redress process adopted by the FCA “proved ineffective for BSPS members, with only 25% of BSPS members raising complaints. Many have not been compensated fully, and for those whose advice firms have entered insolvency, £21 million in compensation has been lost due to financial limits.”
There are already concerns that potentially thousands more cases of mis-selling will push the FCA’s estimated £71.2 million cost of compensation for those who received bad advice significantly higher. The Committee also points to wider problems in the FCA’s authorisation and oversight of small firms, its access to data and intelligence to identify problems and its use of enforcement powers to respond to them quickly.
Dame Meg Hillier MP, Chair of the Public Accounts Committee, said:
“Whatever your views on the pension freedoms introduced in 2015 they clearly came with significant risk - yet a full two years later the FCA was behind the curve when the British Steel pension scheme was opened up for unscrupulous financial advisors to transfer steelworkers’ life savings out of a gold-plated scheme and into whatever ‘investment’ would produce the highest advisor fees.
The head of the FCA at the time, Andrew Bailey, stressed to the PAC that these were the ‘most complicated financial decisions a person could make in their lifetime’ - so how was it that even with 2 years lead time the organisation was unprepared: first for the systematic mis-selling that robbed thousands of their life savings and retirement plans, and then in coming up with a redress process which is hard for those affected to navigate.”
Comments by Nick Smith MP for Blaenau Gwent
Nick Smith MP for Blaenau Gwent, lead PAC member on this inquiry who has led the campaign on behalf of BSPS members, said: “Steelworker pensioners came to me four years ago telling me they had been ripped-off and were worried that no one was there to help.
This report shows how badly they were treated, and where the FCA failed to support them in their hour of need.
The FCA failed to get a grip on this scandal at the outset, was slow to respond in the aftermath and not nearly enough has been done to hold those responsible to account.
Working people in this country need a regulator that protects them and is able to take strong action against the financial sharks that would target them.”
- Inquiry: British Steel Pension Scheme
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