FCA could be sleepwalking into another huge misselling scandal

12 January 2018

The Work and Pensions Committee publishes responses from the FCA, financial advice firm Active Wealth and "introducer" firm Celtic Wealth, following evidence on the British Steel Pension Scheme (BSPS) in Parliament in December.

The responses raise a series of further questions about the FCA's actions in regard to the BSPS, which the Committee will be pressing them further on:

FCA intervention in British Steel Pension Scheme

The timeline of FCA intervention in the BSPS saga, including specifically in relation to Active Wealth.

Although it is apparent Active Wealth was already on their radar, the FCA first contacted the firm about the BSPS specifically in November 2017 – two months after BBC investigators presented it with evidence they had uncovered on Active Wealth and Celtic Wealth.

The FCA had requested case files and outlines of business processes from Active Wealth between August 2016 and February 2017, leading to a visit by the FCA in July 2017. As a result, Active Wealth's director Darren Reynolds agreed not to recommend any "non-standard assets" to clients. It is unclear whether this means that Active Wealth had been recommending “non-standard assets” to pension transfer clients before July 2017.

The FCA finally required Active Wealth to cease advising on new pension business 14 months after it first started digging, and just weeks before the original deadline for BSPS members to make a decision on their pension.

Active Wealth's reductions for early retirement

The description by Active Wealth of the Scheme's reductions for early retirement as “taking a penalty” and “suffering a penalty” raises the question of whether they were using this pejorative characterisation of what is actually simply an actuarial calculation in their advice to clients.

Size of transfers and fees

Questions remain over the actual size of transfers handled and fees received for them. The highest transfer value that Active Wealth handled in respect of BSPS clients was £790,404 and the average was £398,347 - representing upwards of £40 million transferred out of BSPS on their advice alone.

Active Wealth state they advised over 300 clients on BSPS transfers, "around a third" of whom acted on that advice to transfer out. Their director Darren Reynolds failed to answer the specific question of how many in total of those 300 plus individual pension savers were advised to transfer out of the “gold-plated” scheme.

The highest and average fees paid to them so far described as £1,500 and £1,443 respectively. The fees seem very small relative to the huge transfer values and it is unclear how many BSPS clients signed up to an ongoing adviser charge or what that might cost them ultimately in total.

Protecting businesses rather than pension savers

Commenting on the responses published today, Chair of the Committee Rt Hon Frank Field MP said:

"I have already described the FCA's action on BSPS as grossly inadequate, and these responses do nothing to increase my estimation.
The FSA was reformed and renamed amid concerns that it was too close to the financial businesses it was supposed to regulate. From their intervention in this affair it seems clear that the FCA's actions still effectively protect these businesses' ability to make money out of pension funds, rather than protecting pension savers. They must take care they are not sleepwalking into yet another huge misselling scandal."

Further information

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