FCA writes to 7,700 steelworkers and bans contingent charging

In an update on the city watchdog's work on defined benefit transfer advice, published on Friday, the FCA said it had found the percentage of British Steel members given unsuitable transfer advice was higher than average.

Only 21 per cent of the 192 instances of advice to former British Steel members reviewed by the FCA appeared to be suitable, 47 per cent was unsuitable and 32 per cent contained information gaps.

It said: “Given these latest findings, the FCA intends to write directly to all 7,700 former members of BSPS for whom contact details are available, who transferred out. 

“This will help them revisit the advice they received, and to complain if they have concerns.” 

The regulator has already undertaken a number of actions designed to help those who transferred out of the BSPS. Last year it hosted a series of events in Port Talbot for steelworkers “concerned about the advice” they received. 

It has also previously written to almost 4,000 former scheme members advising them how to complain.

BSPS members were asked to decide by December 2017 whether to move their defined benefit pension pots to a new plan, BSPS II, or stay in the existing fund, which was then moved to the Pension Protection Fund as part of a restructuring of pension liabilities.

The scheme had about 130,000 members, of which 44,000 were deferred, which meant they had the option of transferring out. About 8,000 of these transferred out of the scheme by October 2018, collectively worth about £2.8bn.

The FCA also announced on Friday that it will ban contingent charging on defined benefit transfers, in all but a few pension transfer scenarios. To mitigate the effects of the ban, which will come into effect in October, the watchdog will introduce abridged advice as another route for consumers to have access to lower fees.

In a policy statement, the regulator confirmed that only consumers with certain identifiable circumstances, such as those suffering from serious ill-health or experiencing serious financial hardship, will still have access to contingent charging. 

The FCA said by introducing this ban it will remove the conflicts of interest that arise when a financial adviser only gets paid if a transfer goes ahead. 

However, the regulator is introducing proposals to allow advisers to provide an abridged advice process, which it says “will help consumers access initial advice at a more affordable cost”. 

This new type of advice will include an introductory chat with the client, where the adviser can get some high-level information about their circumstances, and determine that the consumer is not a viable candidate for a transfer.

The result of abridged advice can only be to not transfer, and the adviser is expected to conduct a full fact-find and risk assessment, including an assessment of the client’s attitude to transfer risk in line with the FCA’s guidance on assessing suitability.

This article first appeared on FTAdviser.com