Less than a week after the UK’s National Audit Office (NAO) released its report into the British Steel Pension Scheme (BSPS) scandal, the Public Accounts Committee has announced it will open an inquiry into the case as well.
It will investigate what work was undertaken to “regulate financial advice in the BSPS case” as well as what has been set up to support steelworkers who may be entitled to redress.
This will entail questioning the “chief executives of the Financial Conduct Authority (FCA), the Financial Ombudsman Service (FOS) and the Financial Services Compensation Scheme (FSCS)”, the committee said.
Matthew Connell, director of policy and public affairs at the Personal Finance Society, told International Adviser he believes the BSPS scandal can be linked to how hastily pension freedoms were rolled out in 2015 without considering its repercussions on the financial advice and pension industry.
He said: “Pensions freedoms were introduced at speed, without proper consideration of all the potential unintended consequences. In addition, the BSPS scenario was created by an employer that was more interested in controlling costs than educating its employees. The FCA’s rules have become more prescriptive as time has gone on, but it is important to remember that the period after pensions freedoms were introduced was one of great uncertainty.
“This uncertainty, coupled with concerns about how defined benefit (DB) pension transfer advice will be judged by the FOS, has resulted in professional indemnity insurers refusing cover or rocketing premiums in recent years. Today the public’s access to affordable advice is far more restricted than when pension freedoms were first granted by the government.
“Reduced access to affordable advice should be of as great a concern to the FCA as unsuitable pension transfers was, as it puts people at risk of falling foul of scammers who are looking to exploit this vulnerability in the market and steal pension pots.”
Redress scheme ‘vital’
Simon Harrington, head of public affairs at Pimfa, agrees that a lot has been done to protect pension holders from harm since the British Steel scandal broke in 2017, and he told IA the committee must consider that many steelworkers are eligible for compensation but still haven’t submitted any claims for it, and that should be addressed.
“It is right that the Public Accounts Committee considers the NAO’s findings more broadly especially given the serious nature of the multitude of failings arising from the British Steel crisis, ” he said. “In reviewing the regulatory approach, it is important to consider that the FCA has undertaken significant improvements to the DB transfer regime in the past four years – conducting two wide-ranging consultation exercises and making its expectations of firms clear with respect to their own conduct and professionalism.
“We have previously argued that standards have improved exponentially, and the suitability of advice given has improved along with this since British Steel and there is no reason to think otherwise today.
“With respect to compensation, the point remains that significant numbers of individuals who transferred out of the scheme who may be eligible for redress have not come forward. On this point, we will work cooperatively with the regulator on the design and delivery of the BSPS redress scheme.
“We believe that it is vital going forward that such a scheme gives due consideration to individual outcomes with respect to the calculation of their transfer value, the investment they found themselves in and, of course, the suitability of the advice given.”