The Financial Conduct Authority (FCA) has set out plans for a compensation scheme worth £71.2m for former members of the British Steel Pension Scheme (BSPS) who received unsuitable advice to transfer out of the scheme.

It has been proposed that the compensation scheme will cover individuals who transferred out of the BSPS between 26 May 2016 and 29 March 2018.

If the scheme is approved, the FCA will publish rules outlining how advisers must determine whether they have unsuitable advice and whether they need to pay compensation.

The FCA previously found that 47 per cent of the advice relating to the BSPS was unsuitable.

The regulator stated that independent checks and monitoring will be put in place to ensure that firms comply with the rules of the scheme and that consumers can be “confident” in the outcome of the review.

If confirmed, the compensation scheme is expected to be in place by early 2023, with affected consumers starting to receive compensation from late 2023.

People who believe they have a claim to compensation can make a complaint now rather than waiting for the outcome of the consultation.

Individuals who received advice from a now insolvent business or one that no longer exists will need to make claims through the Financial Services Compensation Scheme.

Those who have already accepted redress will not be covered by the proposed scheme.

Commenting on the proposals, FCA executive director for consumers and competition, Sheldon Mills, said: “The circumstances around BSPS transfers were exceptional, with former members receiving significantly higher levels of unsuitable advice compared with other cases.

“We want individuals who lost out financially after receiving unsuitable advice to receive compensation through our scheme.”

The FCA’s consultation will run until 30 June 2022, except for the section on calculating redress, for which it is asking for responses by 12 May 2022.

The regulator is also updating its guidance for firms on how to calculate redress for unsuitable DB transfers, which will be published in summer 2022.

Also commenting on the proposals, AJ Bell head of retirement policy, Tom Selby, said: “Given the colossal scale of pension transfer misselling that has occurred, a formal redress scheme for BSPS members was always likely to be needed.

“Confirmation of this £71.2m scheme by the FCA today brings those affected one step closer to getting their money back.

“The focus now must be on getting the scheme up-and-running so the estimated 1,400 members who have been badly advised have their compensation claims processed as quickly as possible.

“Although transferring out of a guaranteed DB pension can make sense in certain circumstances, this is a big decision and one where good quality advice with the member’s interests at its core is absolutely crucial.

“It is clear that far too many British Steel scheme members were badly let down in this regard.”

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