Speaking at a press conference this morning, the FCA’s director of consumer investments Therese Chambers said the British Steel situation was ‘truly unprecedented’ and the complex decisions steelworkers were forced to make required ‘expert and clear’ financial advice.
‘But our work has uncovered far too many steelworkers were let down by their advisers,’ Chambers said. ‘The scale of unsuitable advice we have identified was exceptionally high – almost 50%.
‘There were firms who took advantage of the situation and enriched themselves. Some firms have not done the right thing by steelworkers who have complained, and some are still seeking to avoid accountability. It is against that context that we have decided to proceed with a consumer redress scheme.’
The scheme will include advice offered by 343 firms and see over 1,000 steelworkers paid out in compensation.
Back in March a consultation paper outlined the redress scheme requirements for advice firms to identify the consumers they gave British Steel advice to. They had to undertake a suitability assessment on these cases and then calculate the redress payable if the advice was unsuitable.
Consumers will be given the choice to take the compensation as a lump sum or have it added to their personal pension. The redress calculation uses the FCA’s general pension transfer model of working out how much money you need to top up a personal pension to buy an annuity that will replicate the income from the British Steel Pension Scheme.
As annuity rates have fallen in recent months, the average expected pay-outs will be £45,000, down from £60,000, leading to total compensation of £49m not £71.2m.
The regulator said it still expects around 40 firms to go bust because of the redress scheme.
Asset retention scheme
The FCA also announced today an extension of its asset retention scheme, designed to stop those advisers, guilty of from unsuitable investment advice from taking cash out of their business through dividends for example to avoid paying consumers redress.
The new rules will apply asset retention until firms have resolved all British Steel cases.
How can we help you?
Here at Smooth Commercial Law, we have been following the progression of the British Steel redress scheme. We are acting for clients who have unfortunately been a victim of negligent pension transfer advice. If you have been affected by unsuitable pension transfer or investment advice and lost money, contact a member of our expert team today by filling out the online contact form or calling 0800 046 9976. All calls to us are confidential and initial advice to outline your options is free.