British Steel pension savers are to be compensated if they were poorly advised to switch their pension pots away from the company’s more lucrative defined benefits plans.
The watchdog Financial Conduct Authority (FCA) has set out a plan which it says will deliver compensation worth £71.2 million to those who were misled about their pensions.
Around 8,000 steelworkers transferred away from the defined-benefit British Steel Pension Scheme, and some of these suffered big losses as a result, according to the National Audit Office.
Most of these took advice from a financial adviser in the process, with these advisers regulated by the FCA.
The regulator said that close to half (46%) of all the advice it had reviewed turned out to be unsuitable.
Advisers will now be forced to pay compensation to those who received unsuitable advice and switched away.
If the advisers have gone out of business since the advice was given then the Financial Services Compensation Scheme will step in, with payments expected to start from the end of next year.
Sheldon Mills, executive director for consumers and competition at the FCA, said: “The circumstances around British Steel Pension Scheme transfers were exceptional, with former members receiving significantly higher levels of unsuitable advice compared with other cases.
“We want individuals who lost out financially after receiving unsuitable advice to receive compensation through our scheme.”
In a letter sent to advisers on Thursday, the FCA said: “Under the proposed redress scheme, firms which advised on British Steel Pension Scheme transfers would be required to review their advice.
“If the advice is unsuitable and resulted in a financial loss for former British Steel Pension Scheme members, the firms would be required to provide compensation.”
It added that “failing to act on the requests in this letter” could allow the FCA to take action against the adviser.
