FCA demands withdrawal of unsolicited BSPS settlement offers
The FCA's redress scheme for members of the British Steel Pension Scheme commenced on 28 February 2023, notwithstanding an ongoing legal challenge. The FCA has separately issued three publications criticising firms for making unsolicited settlement offers to consumers before the scheme began.
The FCA's widely publicised scheme seeks to provide redress to BSPS members who received inappropriate advice on transferring out of their pension scheme. It is only the second time in its history that the FCA has used its powers under s404 of the Financial Services and Markets Act to impose an industry wide past business review.
The FCA has faced criticism for the scheme, which unusually is implemented on an "opt-out" basis, meaning firms are having to put their clients through the scheme even if they have not complained or asked to be included, unless they specifically opt-out.
The FCA is also facing a legal challenge to the scheme, due to be heard by the Upper Tribunal in April. This challenge is made on behalf of firms who are part of the British Steel Adviser Group. One key aspect of the challenge, we understand, relates to the fact that, as a result of rising gilt yields, redress for those given unsuitable transfer advice, as calculated using the FCA's own methodology, is now much lower than it was last year when the scheme was established. It has therefore been argued by the British Steel Adviser Group that there is no longer a need for the scheme to be implemented because ex-members of the BSPS have not, in fact, lost out as a result of their transfers to the extent the FCA first believed.
With this challenge ongoing, the FCA has published three recent articles criticising a few firms who are part of the British Steel Adviser Group for making unsolicited settlement offers to consumers who would fall within the scope of the redress scheme. They made their initial criticism of these offers on 26 January 2023 where they described the offers as misleading and warned consumers on losing their right to be part of the scheme if they accepted these. The FCA made further comments on 7 February where they demanded that unsolicited offers be withdrawn and no further offers be made.
The latest publication, on 22 February sets out that the FCA has required two of the firms that made unsolicited offers to continue to apply the redress scheme even to those clients who accepted the offers. This is a significant development as the original scheme rules exclude anyone who has accepted a full and final settlement offer from being part of the redress scheme.
Whilst the FCA is concerned that firms making unsolicited offers to clients are offering less redress than the clients would be entitled to under the redress scheme, in many cases the FCA may be proved wrong on this, given the movements on redress costs mentioned above. The FCA continues to refer to historic figures, which they say shows average redress costs are £45,000. However, it is now expected by many in the industry that average redress costs will be far lower. Indeed, in our recent experience, often no redress is due at all.
Whether this adds further fuel to the legal challenge remains to be seen. In the meantime, firms now face little choice but to proceed with putting their BSPS clients through the scheme.