City watchdog plans £17m pension compensation for steelworkers who were wrongly advised to switch their pots
The City watchdog is planning a £71million compensation scheme for steelworkers who were wrongly advised to switch their pension pots.
Around 8,000 staff transferred £2.8billion from the British Steel Pension Scheme (BSPS) when it was restructured in 2017.
The Financial Conduct Authority (FCA) said almost half of the guidance the workers received was ‘unsuitable’.
Burned: Around 8,000 staff transferred £2.8bn from the British Steel Pension Scheme when it was restructured in 2017. Virtually all – 95% – of those who switched used financial advisers
Virtually all – 95 per cent – of those who switched used financial advisers, according to the National Audit Office.
In 2018, Parliament’s work and pensions committee found unscrupulous advisers, helped by ‘parasitical so-called introducers’, targeted steelworkers who were members of the BSPS for ‘dubious personal gain’.
They added that many pensions ended up in ‘unsuitable funds characterised by high investment risk, high management charges and punitive exit fees’.
Workers who switched lost out on what were ultimately better deals to switch to a new BSPS or staying with the existing one, which was transferred into the Pension Protection Fund.
The regulator has now said it will secure compensation for affected workers, forcing firms that gave poor advice to cough up payments.
If any of those companies have gone bust, the Financial Services Compensation Scheme will step in instead.
The FCA’s compensation plan is still only a proposal at the moment, but if it goes ahead, payments are expected to start in late 2023.
It targets those who transferred out of the main fund between May 2016 and March 2018. A consultation on the programme will close at the end of June.
The FCA has said it will take ‘strong action’ against firms which try to avoid their responsibilities to pay compensation.
Sheldon Mills, executive director for consumers and competition at the FCA, said: ‘We want individuals who lost out financially after receiving unsuitable advice to receive compensation through our scheme.’