The Financial Conduct Authority (FCA) has confirmed plans to deliver a redress scheme for former members of the British Steel Pension Scheme (BSPS) who received unsuitable advice to transfer out, with over 1,000 customers expected to receive redress.

Following an industry consultation, the FCA published the final rules on calculating redress payments for unsuitable defined benefit (DB) pension transfer advice, in an effort to put consumers back in the financial position they would have been in had they not transferred.

Under the rules, redress will be based on the money needed to top up a personal pension, to allow the consumer to purchase an annuity at retirement that provides an income similar to what they would have received had they stayed in the BSPS.

However, the FCA pointed out that as it now costs less to buy an annuity, the average redress payout in the scheme is expected to be around £45,000, rather than the initial estimate of £60,000.

According to the FCA, consumers should expect to be contacted by their adviser between 28 February 2023 and 28 March, with advice being reviewed by the end of September 2023.

Firms will then be expected to provide consumers with their redress calculation by the end of December 2023 for those who opt to receive it as a lump sum, and by February 2024 for those who opt to receive a payment into their pension.

Customers of firms that are no longer trading, meanwhile, will need to make a claim with the Financial Services Compensation Scheme (FSCS).

Alongside the final rules for the redress scheme, the FCA has launched a consultation on plans to extend its temporary BSPS asset retention rules, to help prevent firms seeking to avoid the cost of redress liabilities and reduce the potential burden on the FSCS.

This extension aims to ensure that the rules continue to apply until firms have resolved all the scheme cases that they are responsible for, plus other relevant cases outside the scheme, including complaints that were referred to the Financial Ombudsman Service.

This is expected to help ameliorate some of the risk of asset dilution, with the FCA stating that while it initially estimated that FSCS would be responsible for £20.6m of the redress paid in its central scenario, it now estimates this at £15.4m.

Commenting on the plans, FCA executive director for consumers and competition, Sheldon Mills, stated: “We have consulted widely on a redress scheme for British Steel Pension Scheme members.

"We found that almost half the advice given to members was unsuitable – an exceptionally high level compared with other cases.

"Today we’re confirming the rules for the redress scheme, so that BSPS members can get the retirement they worked for.

“We’re working to get the scheme in place quickly to end uncertainty for members. We will be watching advisers closely and have put in place checks so that consumers can have confidence that they’re being treated fairly under the scheme.”

The regulator confirmed that it will be providing a tool that firms will have to use to calculate redress payments.

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