The Financial Conduct Authority (FCA) is to change its methodology for calculating redress for non-compliant pension transfer advice.
The FCA has been heavily criticised over how it has responded to the British Steel Pension Scheme (BSPS) transfer scandal, with MPs accusing the regulator of having “inadequate” oversight of the firms involved.
Today’s consultation paper said that the changes to the regulator’s methodology for calculating redress will include former members of the BSPS scheme.
The regulator said that it has reviewed its methology for calculating redress for consumers who have suffered a financial loss due to non-conpliant advice to transfer from a DB pension scheme and that it has concluded that “the current methodology remains appropriate and fundamental changes are not necessary”.
The review included an independent report from Deloitte. The report concluded that the FCA’s current approach of calculating redress as a lump sum representing the difference between the capitalized value of the benefits from the DB scheme had the member not transferred remains appropriate.
However, the regulator said it has identified some areas where it could improve or clarify the methodology to ensure it ‘continues to provide appropriate redress’.
The areas the FCA believes it can improve are:
- Consolidating the methodology as rules and guidance in the FCA Handbook
- Changing the approach to determining the consumer’s retirement date
- Payment of redress and how it is explained to consumers
The consultation paper also covers how the regulator’s planned changes will affect the currently proposed BSPS redress scheme.
The FCA consultation will close on 20 September.
The regulator will publish changes to its general approach and how it will implement the proposed BSPS consumer redress scheme this winter.
It expects the BSPS redress scheme to come into force at the start of next year, with members who are eligible to receive compensation later in 2023 or early in 2024.
In 2017, many British Steel workers were advised to transfer out of their defined benefit pension into a defined contribution pension, typically a personal pension or a Self-Invested Personal Pension (SIPP). The scandal has attracted national attention and criticism.
By transferring to a private pension arrangement, the BSPS victims would have potentially lost benefits already built up in the British Steel Pension Scheme.