Some members who transferred out of the British Steel Pension Scheme (BSPS) suffered significant financial losses due to unsuitable advice and were failed to be protected by the regulated financial advice market, according to the National Audit Office (NAO).

In its investigation into the BSPS transfer scandal, the NAO concluded that, alongside these failings and losses, many affected members have not been fully compensated.

The investigation related to the BSPS’s separation from Tata Steel in 2017, at which time members were given alternative pension options, including transferring their savings out of the scheme.

The NAO concluded that the financial advice market was not prepared for the impact of the BSPS restructure, with most advisers at the time being financially incentivised to recommend to members that they transfer out of the BSPS, even if it was not in members’ best interests.

Almost 8,000 members chose to transfer their benefits out of the scheme, with 95 per cent of these decisions informed by financial advisers.

The Financial Conduct Authority (FCA) has so far issued £1.3m of fines and has 30 enforcement investigations ongoing, and previously announced plans for a consultation on a consumer redress scheme that is expected to be launched by the end of this month (March).

To date, only 25 per cent (1,878) of members who transferred out of the scheme have sought redress through complaints.

The NAO stated that the FCA had “limited insight” into the DB transfer advice market and what was happening in the BSPS at the time of restructure.

It found that data on the number of BSPS transfer requests were held by the scheme trustees and administrators, who are not FCA authorised, and the FCA was therefore not aware of the level of interest BSPS members had in transferring out of the scheme.

Furthermore, it noted that the FCA did not have any data on the number of DB transfer requests that were taking place, or on the adviser market in the local areas.

To date, 263 scheme members have lost £18m of redress due to financial advisers going into liquidation.

Almost a quarter (22 per cent) of complaints made to the Financial Ombudsman have been passed to the Financial Services Compensation Scheme (FSCS) due to firms being unable to pay compensation.

According to the NAO’s investigation, the average loss for BSPS claims resolved by the FSCS was £82,660, with individual losses ranging from £0 to £489,000. The compensation limit for advice firms that failed after April 2019 is £85,000.

The FCA previously found that financial advice was unsuitable in 47 per cent of BSPS cases and unclear in a further 32 per cent of transfers.

The NAO noted that the FCA has since changed its approach to regulated the pensions advice market and responded at the time by working with the adviser market and members to try and contain the most immediate harm.

Commenting on the investigation’s findings, Committee of Public Accounts chair, Meg Hillier MP, said: “British Steel pension members were badly let down by placing their trust in the very system designed to protect them.

“The handling of the BSPS case was a failure from top to bottom. Many of the pension advisory firms gave bad advice to customers and the FCA, whose job it is to regulate these firms, was asleep at the wheel.

“Efforts to improve the pension advice market and provide compensation will be too little too late for many BSPS members.

“The bottom line is that many pension members have been left out of pocket and seen the rewards for their years of hard work melt away."

NAO head, Gareth Davies, added: “Although measures have been put in place aimed at improving how the pensions advice market is regulated and to attempt to remedy the financial losses suffered by BSPS members, it is clear that many people have not been compensated fully under current arrangements.

“The BSPS case demonstrates the costs and difficulties of remedying failures in financial services and the importance of preventing problems from occurring in the first place.”

Share Story: