The Financial Services Compensation Scheme has paid out £21.5m to members of the British Steel Pension Scheme who were wrongly advised to transfer their defined benefit pensions, after payment figures have doubled in the past few months.
The lifeboat scheme told FTAdviser it has so far made 482 decisions, including decisions to reject a claim, with an uphold rate of 88 per cent.
The compensation amount has been £50,000 per claim but the overall payout could grow significantly as the FSCS still has 135 claims in progress.
Lawyers for the steelworkers have previously estimated the industry could face a compensation bill of between a quarter and a third of a billion pounds for BSPS transfers, even with steelworkers not being fully compensated for poor pension advice.
The Financial Conduct Authority has repeatedly called on steelworkers to bring a claim. In June 2020, it wrote to all members of BSPS asking them to revisit the advice they received and complain if they have concerns.
In May this year FCA chief executive Nikhil Rathi said the regulator would be writing to all 7,700 members again.
James Darbyshire, chief counsel at the FSCS, told FT Adviser since July the compensation amount paid out has doubled and the bill could rise still.
The FSCS, along with the Financial Conduct Authority, Financial Ombudsman Service and Money Helper, are currently in Swansea holding one-to-one meetings with steelworkers.
It’s expected that more claims could arrive following these meetings after the lifeboat scheme explained to steelworkers in what circumstances and exactly how they can put forward a claim.
Darbyshire said: “[The meetings] have been very well received by the people who've come, with people leaving saying that they are going to make a claim.
“We will obviously have to see whether that tracks through in the weeks ahead and this will be part of the thinking behind what the next sort of event might be.”
Darbyshire said the one-to-one sessions had helped the lifeboat scheme find out if there were any obstacles that were stopping steelworkers from making a claim.
“Sometimes they're not sure whether they should claim or not and we've been clear that there's nothing that should hold them back,” Darbyshire said.
“If they think they might have a claim, then they should come forward.”
Equally, the sessions have helped individuals to know how to fill out a claim online or making it clear that they are able to talk to the customer service team if they need help doing this.
But more needs to be done to make sure steelworkers feel confident enough to come forward and make a claim, Darbyshire admitted.
“The next stage is just to reflect on what we've learned over these few days and see what more we can do in terms of outreach programs,” Darbyshire said.
“We want to talk to the ombudsman and the FCA as well to make it a joined-up process, but I certainly think we're very open to doing more because we think that this has been more successful than just having a kind of more formal presentation style approach, which is what we have done in the past.”
He added: “We need to find whether there are any kind of obstacles that are stopping steelworkers making a claim at the moment [who] really would like to claim.”
The BSPS case
Three years ago British Steel Pension Scheme members were asked to decide whether to move their DB pension to a new plan, BSPS2, or stay in the existing fund, which was then moved to the PPF as part of a restructuring of pension liabilities, or to transfer out altogether.
As a result about 8,000 members transferred out of the old scheme, with transfers collectively worth about £2.8bn.
But concerns about the suitability of the pension transfers were soon raised, leading to an intervention from the FCA that resulted in a number of advice firms – key players in the debacle – stopping their transfer advice service, while others went out of business.
A subsequent suitability review led to almost two-thirds of DB advisers quitting the market, with the FCA saying there are now about 1,200 advisers holding these permissions compared with 3,000 in 2018.
NOTE: We claim no right or title to this article which appears in FT Adviser dot com. Author Amy Austin.