More than 1,000 former members of the British Steel pension scheme who received unsuitable advice from financial advisers accused of “enriching” themselves will receive an average payout of £45,000 in compensation.
The City watchdog on Monday launched plans for a scheme that seeks to compensate those who had not yet received redress after being given poor pension transfer advice when British Steel fell into financial hardship.
The Financial Conduct Authority will also temporarily ban the firms who gave the advice from paying shareholders dividends or giving bonuses to directors in order to ensure they do not shift money out of the business before compensation is paid. They will be forced to make payouts totalling £49m by February 2024.
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“Far too many steelworkers were let down by their advisers,” said Therese Chambers, the FCA’s director of consumer investments.
“The scale of unsuitable advice that we have identified was exceptionally high, almost 50%. There are firms who took advantage of the situation and enriched themselves. There are firms who have not done the right thing by steelworkers who have complained and there are firms who are still seeking to avoid their accountability.
“It is against that context that we have decided to proceed with a consumer redress scheme so that steelworkers can get what they worked for.”
The redress scheme relates to a scandal involving members of British Steel’s defined benefit pension scheme, which guaranteed final salary pensions to its roughly 130,000 members and was restructured in 2017 after British Steel’s then owner, Tata Steel, experienced financial difficulties.
At the time, members had to decide how they would manage their pension benefits. Nearly 8,000 members – representing £2.8bn of the fund – chose to move their cash and take their pensions elsewhere. Advisers gave poor advice and pocketed huge fees.
While the FCA has now settled on a redress scheme for members, it has faced criticism for allowing the poor advice to be doled out under its watch, given it is meant to oversee financial advisers. MPs have since accused the regulator of being “asleep at the wheel”.
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The watchdog said it was considering enforcement after launching investigations against 30 firms, with some now making their way through the courts.
FCA directors stressed it would be “watching advisers closely” throughout the redress process, and has put checks in place to ensure British Steel workers are being treated fairly under the scheme.