Over 1,000 former steelworkers who were wrongly advised to give up gold-plated pensions are to receive £49m in compensation.
The City watchdog has confirmed that members of the British Steel pension scheme who lost money after receiving unsuitable advice will get an average payout of £45,000 each, down from an earlier estimate of £60,000.
The total payout of £49m is £20m lower than previously expected, which the Financial Conduct Authority attributed to a recent change in the value of annuities, which are priced on the yield on government bonds. The redress payments are calculated based on the money needed to use a personal pension to buy a guaranteed income similar to what the member would have received had they stayed in the British Steel pension scheme.
Nearly 8,000 steelworkers transferred their life savings out of British Steel’s defined benefit pension scheme following a restructuring in 2017 after the firm’s owner, Tata Steel, ran into financial difficulties. Many members were left out of pocket after moving their money into risky investments.
The FCA said about 50pc of these members received unsuitable advice from firms charging “contingent fees” for pension transfers. Advisers only got paid if a member decided to go ahead with a transfer. Contingent charging on transfers was banned by the FCA in 2020 after it found evidence it produced poor outcomes for clients.
Sheldon Mills of the FCA said: 'We have consulted widely on a redress scheme for British Steel pension scheme members. We found that almost half the advice given to members was unsuitable – an exceptionally high level compared with other cases.”
Advice firms are to provide 1,100 members with redress payments.
Members should expect to receive their redress calculation by the end of December 2023 if they opt to receive it as a lump sum, while members who choose to receive the payment into their pension should get it by February 2024.
If a member received advice from a firm that is no longer trading, they should contact the Financial Services Compensation Scheme, the FCA said. However, the FSCS can only protect consumers up to a value of £85,000.
Mr Mills said: “We’re working to get the scheme in place quickly to end uncertainty for members. We will be watching advisers closely and have put in place checks so that consumers can have confidence that they’re being treated fairly under the scheme.”