British Steel pension scandal brings shame to financial advice sector - Greg Wright

While their victims face years of anguish, the advisers simply snapped their briefcases shut and disappeared into the shadows. It’s a story as old as time. The unscrupulous will always seek an opportunity to enrich themselves at the expense of those who are simply looking for a wise hand to guide them through the financial maze.

Unpicking the causes of this scandal - and providing redress for the victims - has proved to be a complex affair.

The former boss of the City watchdog said that British Steel pensioners had a gun to their head as they made one of the most complex financial decisions of their lives.

Andrew Bailey, who now leads the Bank of England, told MPs that the situation was “ill prepared”.

Mr Bailey was in charge of the Financial Conduct Authority (FCA) as it dealt with the consequences from the flawed advice given to many British Steel Pension Scheme members.

Around 8,000 steelworkers transferred away from the defined-benefit scheme, and many suffered losses as a result.

Earlier this year, the FCA set out a plan which it said will deliver £71.2 million worth of compensation to those who were misled about their pensions by financial advisers. Close to half (46%) of all the advice the FCA reviewed turned out to be unsuitable.

Mr Bailey hit back at allegations that the FCA had not done enough to protect the scheme members.

“Please don’t think the FCA was sitting on information not doing anything, that was not the case,” he said.

Advisers will now be forced to pay compensation to those who received unsuitable advice and switched away.

If the advisers have gone out of business since the advice was given then the Financial Services Compensation Scheme will step in.

Sheldon Mills, executive director for consumers and competition at the FCA, said: “The circumstances around British Steel Pension Scheme 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.”

Under the proposed redress scheme, firms which advised on British Steel Pension Scheme transfers would be required to review their advice.

If the advice is unsuitable and resulted in a financial loss for former British Steel Pension Scheme members, the firms would be required to provide compensation.

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

PIMFA, the trade association for the wealth management, investment services and the investment and financial advice industry, has said that members who were wrongly advised to transfer out of the British Steel Pensions Scheme should be transferred into the Pensions Protection Fund in order to ensure they are able to receive a guaranteed income.

PIMFA believes past members of the BSPS should be given the opportunity to be placed back in the position they would have found themselves had they not transferred out.

The FCA is investigating 30 individuals or businesses related to the British Steel Pension Scheme saga.

This is not the first time hard working consumers have been targeted by unethical advisers on a mass scale. Sadly, it is unlikely to be the last. The steel workers who were victims of this scandal helped to keep the wheels of industry turning for decades. At the very least, they deserve compensation which reflects the years of mental torment inflicted on them by salesmen who must have known they were doing wrong.