Financial advisers have been told by their watchdog that they will have to compensate British Steel workers who were left out of pocket by bad pensions advice.
The Financial Conduct Authority said it will launch a consultation on redress for thousands of workers who abandoned their valuable final salary pension plans due to potentially bad advice given in 2017 and 2018.
It had previously said that nearly half of all those who switched away from the lucrative scheme were given “unsuitable” advice.
In a letter to the bosses of financial advice companies, the FCA said they should be able to meet any liabilities that could be due.
“Under a redress scheme, firms which advised on British Steel Pension Scheme transfers would be required to review their advice,” the FCA said.
“If the advice is unsuitable and resulted in a financial loss for former British Steel Pension Scheme members, the firms would be required to provide compensation.
“Further details, including the scope of any scheme, will be provided as part of a consultation.”
The FCA’s Board has asked for a consultation to be prepared on a redress scheme for former members of the British Steel Pension Scheme (BSPS) who transferred their pension https://t.co/cQu3GQqYWq
— Financial Conduct Authority (@TheFCA) December 22, 2021
The scandal erupted in 2017 when it emerged that financial advisers were convincing British Steel workers to cash in their defined benefit pension plans – which are based on a final salary – in favour of different schemes.
Earlier this year the FCA said it had examined the advice given to 192 workers and found that just a fifth of them had been given suitable advice, while 47% of the advice was unsuitable.
A further 32% of the advice to those workers contained “information gaps”, the regulator said.
There have been many other cases where pension scheme members have been given poor advice, but the level seen in the British Steel case makes it “highly exceptional”, the FCA.
Reviews of other higher-risk firms found that the level of unsuitable advice was only 17%.
The FCA previously said it would write to all 7,700 former members of the defined benefit scheme who transferred away and advise them to complain if they have concerns about the advice they were given.
However workers complained that the watchdog had done too little too late, prompting calls for a probe into its actions.