The Financial Regulators Complaints (FRC) Commissioner has upheld a complaint over the Financial Conduct Authority's (FCA) handling of the British Steel Pension Scheme (BSPS) advice scandal, concluding that the regulator acted too slowly to prevent widespread unsuitable advice.

In a final report, the commissioner, Abby Thomas, found that the FCA contributed to “serious consumer detriment” among steelworkers.

More than £17.6m has been paid in compensation to over 470 affected customers so far, many of whom suffered losses exceeding statutory limits.

The FCA previously described the case as “one of the worst” it had seen, highlighting the extent of consumer harm within the BSPS advice market.

However, the commissioner has argued that the FCA’s shortcomings were not isolated but reflected “a series of regulatory failings” across the entire lifecycle of the BSPS episode.

In particular, the report concluded that the regulator failed to act on known risks in the defined benefit (DB) transfer market, despite earlier evidence of poor advice standards and systemic weaknesses.

Key criticisms included its delays in banning contingent charging despite recognised conflicts of interest, inadequate oversight of adviser qualifications and professional indemnity insurance (PII), and a failure to gather real-time data on firms advising BSPS members during the “Time to Choose” window.

The commissioner therefore upheld the primary complaint that the FCA was “consistently behind the curve in anticipating, preventing and responding” to the crisis.

She also highlighted that although a redress scheme was introduced, many steelworkers had not been restored to the position they would have held had they remained in the scheme.

In response to the final report, the FCA rejected the central finding, arguing that its actions were “reasonable and proportionate” based on the information available at the time.

The FCA stated that it “does not agree” with the conclusion that it was behind the curve, pointing instead to its risk-based supervisory approach following the 2015 pension freedoms and subsequent enforcement activity.

It noted that more than £106m in redress had been secured for 1,870 former BSPS members and that enforcement action had been taken against over 20 individuals and firms.

The regulator also emphasised that DB transfers were already presumed unsuitable under its rules, placing responsibility on firms to act in customers’ best interests.

However, it acknowledged that data-sharing limitations constrained early visibility of the issue and added that improvements had since been made, including enhanced analytics and closer coordination with other regulators.

In an interim statement, the commissioner signalled that the FCA’s response raised “clear points of disagreement” and would be reviewed in more detail.

A further considered response is expected in due course.

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