Britain’s financial regulator has intervened to stop financial advisers who gave poor advice to British Steel pension scheme members from selling assets to avoid paying compensation.
The Financial Conduct Authority (FCA) introduced the emergency rules, which take effect from April 27, over fears some firms would offload assets if the rules were consulted on first.
Last month the FCA outlined plans for a £71.2m compensation scheme for 1,400 British Steel workers who were misled by financial advisers on their pensions. It said advisers had duped members of the company’s pension scheme to transfer out of the fund into higher-risk schemes while they raked in lucrative fees.
An investigation of the scandal involving workers at the Port Talbot steelworks in south Wales between May 2016 and March 2018 showed about 46% of the advice given by advisers was “unsuitable”.
The FCA said it would take strong action against firms that tried to avoid paying compensation. It has frozen the assets of one firm and is investigating 30 individuals or businesses related to the scheme (BSPS).
Advisers have been able to avoid compensation payments by closing their businesses.
In these cases claimants have been forced to apply for redress from the industry-funded Financial Services Compensation Scheme (FSCS).
The scheme has received about 1,300 claims and paid out £37.3m in BSPS claims. About £15m has also been paid to former BSPS members after the FCA ordered firms to review their previous business.
The temporary measures announced on Monday apply to firms that advised five or more BSPS members to transfer out of the pension scheme between May 2016 and March 2018.
The requirements mean that in-scope firms have to report to the FCA whether they can meet the potential cost of the BSPS redress. Firms will have to comply with the asset restriction rules until they confirm to the FCA that they have sufficient resources to pay their potential redress bill.
“Firms who gave poor advice to British steelworkers must ensure that they retain assets and funds to pay redress under our proposed scheme,” said FCA executive director of consumers and competition Sheldon Mills.
“We are using these emergency powers today to prevent firms from avoiding paying any redress that is due to their customers and to help reduce the potential burden on the FSCS. We will act swiftly if the rules aren’t being followed.”
