Two MPs have described the Financial Conduct Authority’s (FCA) reaction to the British Steel Pension Scheme (BSPS) scandal as “disorganised and lacking in urgency” and the regulator as "not fit for purpose".

A letter from MPs Nick Smith and Stephen Kinnock, who both represent constituencies in Wales affected by the scandal, urged FCA chief executive, Nikhil Rathi, to establish a new consumer arm or taskforce to deal with consumer issues as they arise.

They also called on the FCA implement a consumer redress scheme for those who transferred out of BSPS or implement a review of the advice given to steelworkers.

The former approach would involve the FCA sending letters to all former BSPS members, while the latter would involve the use of S166 notices, which requires firms to carry out a ‘skilled person review’.

Additionally, the letter called on the FCA to do more to hold bad advisers to account, stating that the body needed “to use its full strength to ensure that a crisis of this scale is never allowed to happen again”.

It continued: “The malignant role of introducers in the BSPS scandal has not been sufficiently addressed. In many cases, there was a clear joint venture between pensions specialists and introducers, and yet there have been no consequences for the introducers involved.

“Whilst the FCA has agreed that the actions of the introducers, filling their pockets with the kickbacks or ongoing fees from their referrals to rogue pension transfer specialists, falls far below the standard it expects, the Financial Ombudsman Service has not held any introducers to account.”

Finally, the MPs called for the FCA to properly engage with those who had been affected with a “boots on the ground” approach.

The letter noted that a group of lawyers representing the steelworkers estimated the overall compensation bill to be at least £250m, though added that the amount could be as much as £375m.

An FCA spokesperson commented: “We thank Mr Smith and Mr Kinnock for their letter, and will respond soon.

“We have undertaken a number of actions designed to help those who transferred out of the BSPS. This includes writing to 7,700 former BSPS members to help them revisit the advice they received, and to complain if they have concerns. We have also held events in Port Talbot.

“We have several investigations ongoing into the advice that was given at the time. We have banned contingent charging in most circumstances to remove the conflicts of interest which arise where a financial adviser only gets paid if a transfer goes ahead.”

The BSPS scandal stems from members being asked to make a decision about their defined benefit pensions, leading many to leave the scheme after consulting financial advisers.

The letter stated: “The FCA should be a champion for consumers. Instead, our experiences have been characterised by organisational drift and bureaucratic inertia. Despite our multiple and ongoing attempts to prompt action, the FCA continues to be city-facing and lacks sufficient vision to tackle the issues facing consumers.”

Analysis from the FCA released in June 2020 found that almost half (47 per cent) of the advice given to former BSPS members was unsuitable, while a further 32 per cent of the advice was said to contain “information gaps” and just 21 per cent was deemed suitable.

The letter stated: “Our experience is that the FCA is an organisation that follows rather than leads. This month marks the three-year anniversary of the Time to Choose transfer deadline, and we still feel that the FCA’s actions fall far short of what is needed to tackle this crisis. The steps taken have been disorganised and lacking in urgency.”

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