UK regulator invokes emergency powers to deal with steelworker pension scandal

The UK’s monetary regulator has invoked emergency powers to cease monetary advisers concerned within the steelworkers’ pension scandal from offloading their belongings to keep away from paying compensation.

The Financial Conduct Authority (FCA) stated on Monday it was enacting the emergency guidelines this week, and with out session, as a result of it feared some firms would in any other case get rid of their belongings, leaving a redress invoice to be picked up by the trade lifeboat fund.

From Wednesday, the regulator will forestall monetary advisers to 1000’s of former members of the British Steel Pension Scheme from promoting belongings to keep away from paying their share of a redress invoice the FCA estimates can be £71mn. 

The motion, the fourth time such emergency powers have been used up to now eight years, got here 4 months after the FCA first wrote to chiefs of affected impartial monetary adviser firms, warning them to not do something to keep away from their redress duties.

“We are using these emergency powers today to prevent firms from avoiding paying any redress that is due to their customers and to help reduce the potential burden on the Financial Services Compensation Scheme,” stated Sheldon Mills, the FCA’s government director of shoppers and competitors.

“Firms who gave poor advice to British steelworkers must ensure that they retain assets and funds to pay redress under our proposed scheme.”

Mills added: “We will act swiftly if the rules aren’t being followed.”

The new measure will have an effect on about 90 firms and can solely apply to companies that suggested 5 or extra BSPS members to switch out of the pension scheme between May 26 2016 and March 29 2018.

Companies concerned should show to the regulator they’ve adequate belongings to pay for his or her share of the potential compensation invoice.

The announcement got here two days earlier than Nikhi Rathi, chief government of the FCA, and Mills are because of give proof to an inquiry by MPs into the scandal. It dates again to 2017 when about 7,700 members of the large BSPS plan, most of whom labored on the Tata plant at Port Talbot in south Wales, have been suggested to switch their assured outlined profit pensions right into a lump sum after which to a riskier pension association.

A subsequent evaluation of switch recommendation given to BSPS members discovered that 46 per cent of the recommendation was unsuitable.

The public accounts committee is anticipated to grill the FCA chiefs on the BSPS redress scheme, unveiled final month, which some campaigners branded as “cheap” and “inadequate”.

Al Rush, an advocate for BSPS members and founding father of Echelon Wealthcare, an IFA firm, questioned the timing of the emergency measures forward of this week’s listening to.

“Today’s announcement has a whiff of the last minute about it,” stated Rush.

“I asked the FCA to consider doing something like this three years ago in 2019, because there was a danger IFAs would take steps to avoid paying compensation bills.

“Again this is too little, too late. They should have done this a long time ago.”

As of January this 12 months, the FSCS, which is trade funded, had paid about £37mn in compensation to 1,200 former BSPS members whose IFAs, had gone bust after offering them with unhealthy switch recommendation.

The FCA has estimated its BSPS redress scheme, unveiled final month, would add an additional £20mn to the lifeboat’s redress invoice.

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