Advisers take FCA to court over British Steel redress
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A group of pension advisers has filed a legal complaint against the Financial Conduct Authority’s plans to set up a redress scheme for former British Steel Pension Scheme members, due to start next month. The FCA said it will defend its decision “vigorously”.
The challenge has been made by 45 pension advisory firms who are members of the British Steel Action Group and advised by FS Legal. It was filed at the Upper Tribunal Tax and Chancery Chamber last month and marks the first time a regulator is legally challenged over a redress scheme.
The FCA said: “We are confident that our decision to set up a redress scheme is appropriate and will vigorously defend it.”
Extensive stakeholder feedback from the consultation process was considered in making the redress decision, the regulator said, adding: “We regard the legal challenge as an attempt to delay the payment of redress that is due to some former BSPS members.”
The FCA advised firms to continue to prepare for the implementation of the scheme.
If the scheme should be cancelled, the usual time limits for complaining and referring complaints to the Financial Ombudsman Service will apply, which risks former BSPS members who think they may have received poor transfer advice in 2016-17 being timed out from making a complaint according to the FCA.
Gareth Fatchett, a partner at FS Legal, which represents the pension advisers, said the FCA wrongly assumes that anyone who transferred out and has not yet complained is not happy with the transfer.
Asked if he believes the advice British Steel members received was sound, he said that “not all advice can be sound advice” but maintained that those who stuck with their transfer were happy with it. “Those that haven’t complained had 10 letters from the FCA encouraging them to complain,” he noted.
He also criticised the regulator for dragging its feet over the redress scheme. “Their scheme was launched on 28 November, after the best part of six years looking at the British Steel Pension Scheme, and we had 28 days from the date of publication to bring a formal challenge to the scheme,” he said.
The scheme was due to start on 28 February but given the lead time for hearings at the relevant tribunal, it is now likely to be delayed. The court told mallowstreet a hearing would be held in a matter of months rather than weeks.
“The problem they have... is that the Upper Tribunal will never be able to get a case to run by February 2023,” Fatchett said.
As well as criticising the FCA for its timings, Fatchett said last year's rise in gilt yields means redress payments would have reduced considerably now, so that “there is no benefit to doing this”.
Since being first proposed, the estimated cost of the redress scheme has come down from more than £71m in March 2022. In November, firms were expected to pay redress of £33.6m, with the Financial Services Compensation Scheme paying another £15.4m in compensation where an adviser has gone out of business.
In its policy statement from last year, the FCA said the average redress reduced to reflect changes to the economic environment.
It said its redress calculation “ensures that redress is fair and consistent throughout time, and the amount consumers receive is calculated with the most up to date information at that point in time. Whereas using a fixed set of assumptions would mean that some consumers may be over or under compensated depending on the economic conditions at the time of the calculation.”
The economic assumptions used by the BSPS calculator will be updated on a quarterly basis, and the rate for the key underlying economic assumptions used will be shown in the detailed calculation report, according to the FCA.
What is the likely outcome of this legal challenge in your view?