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FCA Warns Financial Advisers Following British Steel Pension Scheme Buy-out

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The ill-fated British Steel Pension Scheme (BSPS) has left the Pensions Protection Fund (PPF), a Government-backed lifeboat scheme ensuring that company pensions are paid when an employer becomes insolvent. The capped PPF compensation payments are decided by an employee’s age and work history.

In a recent letter to scheme members, Trustees of BSPS confirmed that it had exited its PPF assessment period. This follows ongoing buy out negotiations with Pension Insurance Corporation (PIC). Given these developments, the Government-backed watchdog, the Financial Conduct Authority (FCA) has made it clear that it will take action if scheme members receive unsuitable pension transfer advice.

According to their website, PIC “insures defined benefit pension funds in the UK through pension insurance buyouts and buy-ins”. In September 2020, they bought into the BSPS to the tune of £2 billion, effectively safeguarding pension payments to scheme members. According to the update letter to scheme members, the buy-out with PIC is expected to complete by late summer 2022.

Now that the pension scheme has exited PPF, scheme members who have not already started taking pension income, are once again able to move their funds, potentially paving the way for unsuitable pension transfer advice.

TLW’s financial mis-selling team has widely covered the issues surrounding Defined Benefit (DB) pension transfers, highlighting unsuitable financial advice given to DB pension members, including being advised to transfer into riskier funds, with high charges and no guaranteed income levels.

Following the recent news, a joint statement by the Financial Conduct Authority (FCA), The Pensions Regulator (TPR) and MoneyHelper emphasised that:

“transferring out of a DB pension scheme is unlikely to be in the best interests of most consumers”.

The statement also warned that:

“All advisers should be clear on the FCA’s expectations when offering advice to members of the scheme. Where the FCA sees unsuitable advice or bad practice, it will take action.”

What about DB transfers that have already taken place?

In 2020 we highlighted a letter sent to steelworkers by the FCA, stating that they should seek compensation if they had transferred out of the BSPS. The financial watchdog conducted an investigation and found that nearly half of the defined benefit pension transfers completed since 2017 were unsuitable.

Many of the financial advisers in question stopped conducting pension transfer business and an increasing number have gone out of business. Their insolvency leaves the door open for investors to make a compensation claim of up to £85,000 through the Government-backed Financial Services Compensation Scheme (FSCS), set up to help victims of failed financial firms.

Firms currently declared in default include:

  • Active Wealth
  • Meyado Private Wealth Management London, formerly Berkshire Financial Advisers
  • W. Dallas Financial Services, trading as Portfolio Pension Consultancy
  • West Wales Financial Services, trading as IWA Financial Solutions and Mike Powell Mortgages
  • Acklam Financial
  • Douglas Baillie
  • Intuitive Financial Associates
  • Omega Financial Solutions
  • The Ntrust Group
  • S&M Hughes (trading as Crescent Financial)

We have acted for many former steelworkers who were advised, wrongly, to transfer out of the British Steel Pension Scheme, people who will have lost out on potentially hundreds of thousands of pounds.

Working on a ‘no win – no fee’ basis, TLW’s experienced team of financial mis-selling specialists can help you through the compensation process. Our clients are reassured by our knowledge and experience of FSCS claims and, indeed, we have had claims successfully upheld for clients whose claims had previously been refused on purely technical grounds.

Commenting on recent developments, Head of TLW’s Professional Negligence Team, Sarah Spruce said:

“The strongly-worded joint statement from FCA, TPR and MoneyHelper reflects the very real concerns they have regarding the potential for more unsuitable pension transfer advice being given to scheme members. Have you transferred your British Steel pension? Do you still think the advice to transfer was right for you? Our expert team at TLW will be able to tell you. All it takes is one call, there’s no obligation to make a claim and your initial call won’t cost you anything.”

If you are concerned that you or a loved one were not given the right advice about leaving a final salary/defined benefit pension, please call us on 0800 169 5925 or use our online form and our team will contact you for an initial, no-obligation consultation.

It is important to get advice as soon as possible as strict time limits can apply.

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