The Personal Finance Society has asked the Financial Conduct Authority to reconsider plans for assessing the amount of compensation owed to British Steel pension scheme members.
The professional body has called for:
1. The FCA to ditch plans to mandate compensation in the form of a lump sum, since such compensation does not address the central issue of British Steel Pension Scheme members giving up a guaranteed income.
2. The Department of Work & Pensions and the Pension Protection Fund to work together to ensure clients are re-admitted to the British Steel Pension Scheme or admitted to the Pension Protection Fund.
3. Where the Defined Benefit Advice Assessment Tool process is not adequate to address the individual circumstances in a case, it should allow for advisers to have a right of appeal to an independent, qualified transfer specialist that requires a review of the full file and the specific circumstances involved creating the recommendation.
While the timeline set out in the FCA’s consultation on determining compensation is accurate, the Personal Finance Society has flagged advisers giving advice during the period had no way of knowing what information the British Steel Pension Scheme would publish in the future.
To encourage the FCA to rethink their approach, the Personal Finance Society has shared information with the regulator about cases where advisers were told by the British Steel Pension Scheme that early retirement options could not be issued as their client was not old enough.
According to the professional body, this example highlights how the regulator’s assessment tool process is not sophisticated enough to establish a full picture of what could have been reasonably expected from financial advisers working with limited information rather than the full facts in individual cases.
In addition, the professional body has raised concerns that the training given to people using the Defined Benefit Advice Assessment Tool is only around two days compared with the approximately 13 weeks that it takes to become qualified as a pension transfer specialist.
The Personal Finance Society has informed the regulator that it is highly questionable whether individuals working with Defined Benefit Advice Assessment Tool training alone are able to consider cases according to the factors that apply to an individual case.
As a result, the Personal Finance Society has stated the FCA should amend the timetable to provide for circumstances where advisers had good reason not to seek information on conversion rates.
Matthew Connell, director of policy and public affairs of the Personal Finance Society, said: “Clients who received poor quality advice to transfer out of the British Steel Pension Scheme transfers should receive compensation, but we are concerned about the way suitability of recommendations will be assessed and whether a lump sum can ever replace a guaranteed income.
“We accept that there were very poor practices among some firms involved in giving advice to British Steel Pension Scheme members. However, the FCA research shows that good advice was also given, which means the review must be fair, proportionate, and operate on a case-by-case basis.
“Given that so much of the detriment that applies to British Steel Pension Scheme members relates to a loss of guaranteed income, we do not think it is right for the compensation scheme to mandate those who received poor advice only receive a lump sum.
“The regulator needs to rethink their approach and work with the Department for Work & Pensions, The Pensions Regulator plus the Pension Protection Fund to ensure British Steel workers retirements are put back in the financial position they would have been in if they were not advised to transfer out of the British Steel Pension Scheme.”