What happened?
The Financial Conduct Authority has launched its formal redress scheme for the British Steel Pension Scheme (BSPS), following research showing that 47% of advice given was unsuitable. This mis-selling affects approximately 1,100 consumers, with average payouts estimated at £45,000 per customer, representing a total sector liability of around £49 million.
Implicated firms face a compressed 12-month timeline to contact affected customers, perform complete suitability reviews, calculate appropriate redress, and issue final payments.
Why does it matter?
The regulator is watching advice firms closely, leaving zero margin for error. DB Transfer cases are highly complex and specialized, requiring expert reviewers to determine suitability. Additionally, firms must handle complex data-gathering issues, such as tracking British Steel funds that have been merged with other plans or transferred across multiple schemes.
Firms are also strictly forbidden from issuing unsolicited, unauthorized settlement offers to clients. Any attempts to resolve cases outside the sanctioned scheme rules will attract immediate regulatory intervention.
Who is affected?
This redress scheme directly impacts financial advice firms, compliance auditors, and specialized pension advisers with historic BSPS cases in their back books.
Key risks
- Missing Tight Deadlines: Failing to meet strict milestones for client contact, case reviews, and compensation calculations within the 12-month window.
- Inaccurate Suitability Reviews: Using under-qualified staff to review complex DB Transfer cases, leading to incorrect redress assessments.
- Unsanctioned Settlements: Attempting to settle claims directly with consumers, resulting in severe disciplinary action from the FCA.
Actions to take
- Begin Back-Book Reviews: Immediately start reviewing all historic BSPS cases in your back book; do not wait for the regulator to prompt you.
- Gather Data Early: Retrieve and consolidate transfer data, including tracking funds that have been combined or moved to other providers.
- Cooperate with the Scheme: Follow the official FCA calculator and guidance, ensuring FOS-escalated cases are managed in parallel.
- Enlist DB Specialists: Secure experienced, independent DB transfer reviewers to ensure accuracy and meet tight deadlines.
Wider implications
The BSPS redress scheme underscores the FCA’s long-term determination to protect savers and penalize systemic advice failures. It serves as a stark warning on suitability standards for the entire pensions industry.
Recommendations
Outsource your review project or augment your internal compliance teams with qualified contractors to ensure complete technical accuracy and timely delivery.
Supporting sources
Frequently asked questions
What is the average payout under the BSPS redress scheme?
The average compensation payout is estimated at £45,000 per affected customer, representing an industry-wide redress total of £49 million.
Can firms make independent settlement offers to affected clients?
No. The FCA has strictly reiterated that firms must not, under any circumstances, approach consumers with unsolicited, unsanctioned settlement offers.
What are the key deadlines in the BSPS redress schedule?
Firms had from 28th February to 28th March 2023 to contact customers. Case reviews must be completed by 30th September 2023, and calculations must be submitted by 31st December 2023.
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