Picking up the pieces of the British Steel pension scandal: is it time for redress?
Our Actuarial & Redress Director, Harry Eastwood, gives his two cents on how firms should be preparing for a spike in British Steel complaints.
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Nearly four years on since the British Steel pensions crisis hit the headlines, there’s still debate in the industry about what factors led to such widespread mis selling. Unscrupulous advisers, the vacuum left by uncommunicative trustees, or an ineffective regulator?
Regardless of the root cause, the issue has been back in the press recently as the FCA and the industry attempt to pick up the pieces.
Earlier this month, the regulator published a webpage encouraging former BSPS members to make a complaint. On top of a flurry of complaints, we know those firms that provided transfer advice to former members are facing increasing scrutiny as the FCA attempts to get to grips with Defined Benefit (DB) pension transfer risk.
The regulator hasn’t confirmed whether it’ll mandate a redress scheme for British Steel advisers, but sustained pressure from MP’s and consumer groups alike means the regulator will likely double down its efforts in this area as we move into the second half of 2021.
We talked to our in-house Actuarial & Redress Director, Harry Eastwood, about what firms need to do next to prepare. Here’s what he said.
“Data released by the FCA itself shows that nearly half of BSPS cases are potentially unsuitable. The firms involved can’t get away from that liability – but they can proactively address it. There’s a few options available.
- Get a ballpark figure
Redress provisioning gives you an initial idea of how much compensation you might need to pay out, which can help with your forecasting.
On the plus side, these types of calculations tend to be relatively low in complexity and can be completed without any time-consuming data gathering. As a result, experienced providers like TCC can turnaround a lot of cases in a short space of time.
- Dig deeper
If you already know the scale of the problem, or you just want a more accurate figure, then we’d recommend getting full redress calculations done.
This is where things can get a bit more complicated, particularly when there’s a number of different receiving funds.
In these instances, outsourcing to an independent party who are used to dealing with more complex redress projects will give you a more robust calculation, which is important for high-profile cases like BSPS.
- Keep British Steel cases front of mind when on the acquisition trail
The historical sale of DB transfers, and particularly BSPS cases, can be a real issue for advice business acquisitions. Many of the acquiring firms we’ve worked with will either change the basis of the deal or pull out completely if significant liability is uncovered. So, it helps to include some calculations in your due diligence process for complete visibility of the risks – and a more accurate price!”
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