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After much speculation, the FCA is set to get the ball rolling on its British Steel Pension
Research suggests that around 47% of advice given under the British Steel Pension Scheme was found to be unsuitable, compared with the average of 17% for comparable products.
With such a high degree of mis-selling, it’s understandable why the regulator ultimately decided to green light a redress programme for the estimated 1,100 consumers who were negatively affected. And with the average payout set to be around £45,000 per customer – roughly £49m in total – firms involved can expect to pay substantial penalties in redress.
The FCA has made clear that it will be ‘watching advisers closely’ throughout the next 12 months to ensure cooperation with the scheme, meaning that there’s little room for error – so what do impacted firms need to know?
Now the redress scheme has been set in stone, firms will have to move fairly quickly to meet their obligations, with the entire process currently slated to wrap up this time next year.
Firstly, firms will be given just four weeks to contact affected consumers, with the window opening on 28th February 2023 and closing on 28th March 2023. All historical advice relating to the BSPS, that falls within the scope of the review, will then need to be looked over by 31st September 2023, giving businesses just six months to conduct thorough case reviews and discern which consumers are owed compensation.
Once eligibility has been confirmed, firms will be required to submit their redress calculations by 31st December 2023 with final payments due by February 2024 – meaning the entire process, from start to finish, has to occur within the space of 12 months.
TCC’s Technical Director, David Boyhan, commented:
“Having been a hot button issue for years now, it’s no surprise the FCA has opted to press ahead with a redress scheme for affected workers. And given the complex nature of DB Transfer cases, firms shouldn’t underestimate the level of work this could entail – particularly if you have lots of historical British Steel cases in your back book.
In order to ensure they meet these tight deadlines, firms are likely going to need experienced reviewers who know just what to look for to gauge suitability accurately.”
As pension advisers will no doubt be aware, DB Transfer reviews are a notoriously specialised product – and so to ensure accuracy, you’ll want to enlist highly skilled and experienced reviewers for this project.
But in truth, this is likely to be just one of several complicating factors, with data gathering itself also potentially posing an unexpected challenge for firms. For example, if receiving schemes have combined the original British Steel funds with those from other sources – or themselves transferred the funds on to further schemes – tracking the true amount and final destination of this sum could prove a headache for even the most capable auditor.
And not only that: it’s highly likely that implicated firms will have cases that are already part way through the Financial Ombudsmen Service (FOS) process, and these will need resolving alongside the scheme. In addition, it’s inevitable there’ll be cases that are out of scope for whatever reason – for instance, where the customer missed the cut-off to complain in time – which will need dealing with separately, i.e. providing customers with written confirmation of why they don’t qualify.
Depending on how many British Steel cases you’re working with, then, there’s clearly a lot to be done and precious little time to work with. So, what’s the best approach to take?
1. Begin reviewing your back book ASAP
With such a high proportion of customers receiving unsuitable advice, any firm with a history of British Steel work should begin reviewing their past cases immediately.
And whilst the FCA will be providing a tool to help businesses assess suitability, the sheer number of moving parts involved means businesses can’t afford to fall into the trap of thinking ‘the regulator will deal with this for us’.
Remember: the FCA may take some pressure off the final step, but it’s your responsibility to get all the pieces in place between now and September.
2. Get a head start on the data gathering process
To ensure no stone is left unturned, firms won’t just have to collate data on the cases where advice turned out to be inappropriate. In fact, you’ll also be expected to provide the FCA with details of every case you’ve marked ‘suitable’ to the customer to begin FOS proceedings if they wish.
The main thing to note here is that even if you find the majority of your advice was suitable, you’re likely going to have to deal with a lot of admin to close the book on these cases once and for all – so it’s worth getting to work as soon as possible.
3. Don’t take matters into your own hands
If you find that your advice has had a less-than-positive impact on one of your customers, it could be tempting to want to reach out and resolve the issue on your own.
However, the FCA has reiterated that firms shouldn’t, under any circumstances, approach consumers with unsolicited settlement offers – and any businesses ignoring this can expect to face swift, sharp action.
So, whatever you do, don’t try and get out in front of proceedings with unsanctioned offers (even if the customer in question hasn’t yet come forward with a complaint). With the redress scheme now underway, the best way to help those affected is to simply cooperate with the regulator and let the process take its course.
4. Enlist the experts
When faced with significant regulatory scrutiny, knowing your review projects are in a safe pair of hands can provide your team with much-needed reassurance.
And luckily, no one knows DB Transfers like TCC. Our compliance specialists have a 20+ year track record in reviewing clients’ most complex, high-risk products in a swift, highly accurate and cost-effective manner.
Whether you’re looking for additional skilled contractors to augment your in-house team – or would prefer to outsource the work to us entirely – our flexible, collaborative approach can provide the level of support you’re looking for.
Download our four-point plan for successful BSPS redress infographic for helpful steps in cooperating with the redress programme.