Some BSPS members to receive redress calculation by end of 2023

In its final rules for a redress scheme for BSPS members who received unsuitable advice, published on November 28, the FCA said consumers should be contacted by their adviser between February 28 and March 28 2023, with advice being reviewed by the end of September 2023. 

Those opting to receive redress as a payment into their pension should receive their calculation by February 2024. 

In a press briefing, FCA director of consumer investments Therese Chambers said: “The period for the suitability review of files is between February and September next year.

“These are rules that we are making in the consumer redress scheme, so they are enforceable as are any other rules in our handbook. We will be keeping a very close eye on firms as they go through this process. 

“If they do not abide by our rules, then we will be holding them to account using our usual supervisory and enforcement tools.”

The City watchdog said it is providing a tool that companies will have to use to calculate redress payments. 

Companies will have to provide details of all cases rated as “suitable” to the FCA so it can check if consumers would like the Financial Ombudsman Service to review their advice independently. 

It expects that more than 1,000 consumers will receive redress as a result and reiterated that customers of companies that are no longer trading should make a claim with the Financial Services Compensation Scheme.

FCA executive director for consumers and competition Sheldon Mills said: “Today we’re confirming the rules for the redress scheme, so that BSPS members can get the retirement for which they worked. 

“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.”

Ahead of the scheme coming into effect, the FCA also confirmed its updated rules on calculating redress payments for unsuitable defined benefit pension transfer advice. 

The regulator said this will better ensure that redress puts consumers back in the financial position they would have been had they remained in their DB scheme.

The FCA first set out plans to deliver £71.2mn in compensation to former members of the BSPS who received unsuitable advice to transfer out of their pension.

Redress is calculated based on the money needed to top up a personal pension, so that the consumer can purchase an annuity at retirement that provides an income similar to what they would have received had they stayed in the BSPS.  

As it now costs less to buy an annuity, the FCA said it expects the average redress payout in the scheme to be lower than originally estimated, at £45,000. 

However, when asked about the impact of those under the age of 55 who are not at the point of buying an annuity, suggesting rates could be different when they retire, Chambers said: “The £45,000 is an average figure. It’s not a precise amount of money that’s going to be handed out to every single steelworker who is entitled to redress. 

“That’s what we calculate as being the average figure and the whole design of the redress process is absolutely designed to put the steelworker back in the position that they would have been had they not transferred out in the scheme.”

Chambers added: “There’s no perfect way of paying redress. It’s an extremely complex matter, and what we have done is we think the best possible way of achieving redress for the steelworkers in these complex circumstances.”

This article originally appeared on FTAdviser.com