Recommendations & Conclusions
23 items
2
Conclusion
Fourteenth Report - Investigation into …
The Financial Conduct Authority has consistently been behind the curve in responding to the catastrophic impact on British Steel Pension Scheme members. The FCA has been slow to respond at all stages of the BSPS case, for example it failed to take effective preventative action after identifying problems with the …
Government response. The Financial Conduct Authority (FCA) thanks the Committee for their report and accepts there are lessons to learn, both for how we operate as a regulator, and for how the wider pensions regulatory system serves to protect consumers. However, the …
HM Treasury
3
Recommendation
Fourteenth Report - Investigation into …
The Financial Conduct Authority has not been sufficiently proactive or timely in using its enforcement powers. To date, the FCA has issued one fine in response to the BSPS case, and while it has 30 more enforcement actions in place, these have been ongoing for years without progress. It relied …
Government response. The FCA should report to the committee on the progress being made on its 30 active enforcement cases, how it is updating its approach to make a clearer distinction about how it enforces against poor conduct and rogue advisers, and …
HM Treasury
4
Conclusion
Fourteenth Report - Investigation into …
The way that compensation has been provided in the British Steel Pension Scheme case has been slow and unfair. BSPS members face significant delays in receiving compensation. Complaints made to the Financial Ombudsman Service take on average eight months to be completed with many taking significantly longer. Many BSPS members …
Government response. In considering the implementation of a consumer redress scheme for BSPS members the FCA should consider how further redress mechanisms can be implemented more quickly and provide fair compensation. 4.1 The FCA has considered how further redress mechanisms can be …
HM Treasury
5
Conclusion
Fourteenth Report - Investigation into …
Seven years after the Pensions Schemes Act, regulated bodies are still not clear on the Financial Conduct Authority’s expectations for consumer protection. The 2015 Pensions Schemes Act provided consumers with greater flexibility for Investigation into the British Steel Pension Scheme 7 accessing their pension savings and allowed DB pension scheme …
Government response. The FCA should be more proactive and consumer- focused in its engagement with stakeholders. It should have a better mechanism for responding to consumer harms and collect more evidence on a regular basis to pick up on issues that are …
HM Treasury
6
Recommendation
Fourteenth Report - Investigation into …
Rejected
The current compensation arrangements do not always protect consumers, can create wider costs to firms and may not have the capacity to cope with future risks in the advice market. The standard approach to redress relies on consumers seeking compensation themselves, but only 25% of BSPS members who received unsuitable …
Government response. The FCA, FOS and FSCS will write to the committee on 21 January 2023 to explain what they are doing to manage risks in the redress system for financial service; the FCA disagrees with the recommendation to review its handling …
HM Treasury
1
Conclusion
Fourteenth Report - Investigation into …
On the basis of a report by the Comptroller and Auditor General, on 27 April 2022 we took evidence from the Financial Conduct Authority (FCA), the Financial Ombudsman Service (FOS) and the Financial Services Compensation Scheme (FSCS) on the British Steel Pension Scheme (BSPS).2 The session included evidence provided by …
Government response. Based on a report by the National Audit Office, the Committee took evidence on 27 April 2022 from the Financial Conduct Authority (FCA), the Financial Ombudsman Services (FOS) and the Financial Services Compensation Scheme (FSCS). The Committee published its report …
HM Treasury
7
Conclusion
Fourteenth Report - Investigation into …
The impact on members has been catastrophic, both financially and emotionally.15 Alongside losses caused by unsuitable advice to transfer, many members face ongoing advice charges to manage their remining pension savings.16 The FCA is unaware of the total financial loss experienced by members, it told us that it is conducting …
Government response. The Financial Conduct Authority (FCA) agrees with the Committee’s recommendation. Recommendation Implemented An update in line with this recommendation is contained within the letter from the Chief Executive of the FCA to the Chair of the Committee, dated 28 September …
HM Treasury
8
Conclusion
Fourteenth Report - Investigation into …
The FCA failed to take swift and effective action at all stages of the BSPS case. It first became aware of the risks of unsuitable transfer advice in 2015 after the introduction of the Pensions Schemes Act but failed to take sufficient action to prevent consumers from being harmed. At …
Government response. The Financial Conduct Authority (FCA) agrees with the Committee’s recommendation. Recommendation Implemented An update in line with this recommendation is contained within the letter from the Chief Executive of the FCA to the Chair of the Committee, dated 28 September …
HM Treasury
9
Conclusion
Fourteenth Report - Investigation into …
The former Chief Executive of the FCA told us that, as the BSPS case unfolded, the FCA did not have the data to tell it which firms had provided advice to members and found it difficult accessing this information when it needed it. This delayed its response and meant it …
Government response. The Financial Conduct Authority (FCA) agrees with the Committee’s recommendation. Recommendation Implemented An update in line with this recommendation is contained within the letter from the Chief Executive of the FCA to the Chair of the Committee, dated 28 September …
HM Treasury
10
Conclusion
Fourteenth Report - Investigation into …
Acknowledged
In response to the BSPS case, the FCA had to gather further evidence to understand the scale of the problem and in June 2018, out of a sample of 192 files, it found that 47% of transfer recommendations were unsuitable.25 In order to take action against regulatory non-compliance, the FCA …
Government response. The FCA provided a high-level update on enforcement activity related to BSPS, stating it is a high priority and investigations are at an advanced stage.
HM Treasury
11
Conclusion
Fourteenth Report - Investigation into …
The FCA implemented ineffective regulatory interventions in its initial response to the BSPS case. For example, the FCA issued letters to advice firms reminding them of their obligations to provide advice that is in consumers’ best interests, showing its naivety in failing to understand the behaviour and motivations of unscrupulous …
Government response. Intervention work carried out by the FCA has also led to 48 firms withdrawing from the defined benefit pension transfer advice market. Interventions made by the FCA have required firms to cease all regulated activities relating to DB pension transfers …
HM Treasury
12
Conclusion
Fourteenth Report - Investigation into …
To date, the FCA has only issued one fine in response to the BSPS case.36 It told us that it is working on a further 30 enforcement cases, but despite working as “swiftly 22 Qq 37, 38 (27 April) 23 Qq 37, 38 (27 April) 24 Qq 72–75 (27 April) …
Government response. The FCA is able to provide a high-level update on enforcement activity as set out below. 3.2 Enforcement activity related to BSPS is a high priority for the FCA. The FCA currently has c.30 ongoing investigations into firms and individuals …
HM Treasury
13
Conclusion
Fourteenth Report - Investigation into …
Alongside the unsuitable advice provided by firms, there have been other issues of non-compliance within the BSPS case, including unregulated introducers and phoenixing. The FCA has identified that in 30% of BSPS cases members were introduced to their adviser by third parties, and whilst some introducers are authorised and regulated …
Government response. The government disagrees with the Committee’s recommendation. 3.10 It does, however, recognise the importance of the recommendation and welcomes the Committee’s view on the need for effective mechanisms to consider and, where appropriate, address concerns about activity that is not …
HM Treasury
14
Conclusion
Fourteenth Report - Investigation into …
The FCA oversees the consumer redress process which intends to put consumers back into the financial position they would have been in if unsuitable advice had not been given.45 Consumers must raise complaints directly with advice firms or the FOS within six years of receiving unsuitable advice. However, BSPS members …
Government response. The FCA has considered how further redress mechanisms can be implemented more quickly and provide fair compensation. 4.2 The FCA Business Plan for 2022/23 sets out its plans to improve the redress framework, including carrying out redress exercises with firms …
HM Treasury
15
Conclusion
Fourteenth Report - Investigation into …
The FCA provides guidance on how compensation should be calculated and sets the rules for how compensation is delivered. Calculations use complex financial assumptions which are updated every three months in accordance with market performance, and therefore are subject to changes in the market which causes significant variation in the …
Government response. The FCA will consider the feedback from the Committee as part of its wider response to the BSPS redress consultation and broader feedback statement on compensation as set out below. 4.7 The redress calculation methodology is designed to respond to …
HM Treasury
16
Conclusion
Fourteenth Report - Investigation into …
Many BSPS members have not received the full amount of compensation owed to them due their advisers being unable to pay compensation. The FCA imposes limits on the compensation awarded by both FOS and FSCS, and the FSCS’s compensation limits are significantly lower.52 This unfairly impacts those whose advice firms …
Government response. The FCA will consider the feedback from the Committee as part of its wider response to the BSPS redress consultation and broader feedback statement on compensation as set out below. 4.7 The redress calculation methodology is designed to respond to …
HM Treasury
17
Conclusion
Fourteenth Report - Investigation into …
The FCA and redress organisations worked to engage with and encourage BSPS members to seek compensation through direct letters and in-person events.54 Despite these efforts only 25% of all members who received unsuitable advice have raised claims with redress organisations, and the remaining 75% of members who may be eligible …
Government response. The FCA agrees with the Committee’s recommendation. First part of the recommendation: Implemented 5.2 The FCA’s Business Plan sets out its commitments for tackling conduct that can cause serious harm and how the organisation is joining up its tools to …
HM Treasury
18
Conclusion
Fourteenth Report - Investigation into …
The FCA’s response to the BSPS case highlights wider issues within its regulatory approach. Alongside the estimated 369 firms and advisers that provided unsuitable advice to BSPS members, the FCA found that 17% of DB transfer advice was unsuitable within the wider market. This is a significant proportion of non-compliance, …
Government response. The FCA disagrees with the Committee’s recommendation and does not consider that a review of how it is handling the wider DB transfer market should be undertaken. 6.3 Based on the evidence the FCA holds and the extensive work it …
HM Treasury
19
Conclusion
Fourteenth Report - Investigation into …
There is a fundamental misalignment between legislation and regulation of the DB pensions advice market, which has caused confusion over the suitability of transfer advice.60 The 2015 Pensions Schemes Act introduced by HM Treasury was intended to provide greater freedom and flexibility for consumers to manage their pensions, allowing DB …
Government response. Seven years after the Pensions Schemes Act, regulated bodies are still not clear on the Financial Conduct Authority’s expectations for consumer protection.
HM Treasury
20
Conclusion
Fourteenth Report - Investigation into …
In direct response to the 2015 Act, the FCA announced a new starting position for advisers who should assume that in most cases a transfer will be unsuitable.63 Subsequently in 2017, the FCA sought to align itself with the government’s underlying philosophy of choice within pensions policy and consulted on …
Government response. The FCA agrees with the Committee’s recommendation. Recommendation Implemented The FCA consulted on removing the starting position that advisers should assume that in most cases a transfer will be unsuitable, to align itself with the government’s underlying philosophy of choice …
HM Treasury
21
Conclusion
Fourteenth Report - Investigation into …
There are also wider uncertainties within the advice market, including the provision of Professional Indemnity Insurance (PII). PIMFA told us that the availability of PII has become severely limited because insurers are struggling to accurately predict the risk of 58 C&AG’s Report, para 9, 2.5 59 Qq 83, 86 (27 …
Government response. The FCA, FOS and FSCS will write to the committee on 21 January 2023 to explain what they are doing to manage risks in the redress system for financial service.
HM Treasury
22
Conclusion
Fourteenth Report - Investigation into …
The standard complaints-based approach to redress, which relies on consumers seeking compensation themselves, has proved ineffective in the BSPS case. Only 25% of members who received unsuitable advice have raised a claim with redress organisations.69 The FCA told us that it was surprised that more members hadn’t raised a complaint …
Government response. The FCA agrees with the Committee’s recommendation. First part of the recommendation: Implemented 5.2 The FCA’s Business Plan sets out its commitments for tackling conduct that can cause serious harm and how the organisation is joining up its tools to …
HM Treasury
23
Conclusion
Fourteenth Report - Investigation into …
Redress arrangements also impact on the wider pension’s advice market. Firms should have PII cover to afford the cost of compensation, and whilst firms had cover when they provided advice, many are unable to access insurance for subsequent years.72 This leads to firms being unable to pay compensation and forced …
Government response. Firms should have PII cover to afford the cost of compensation, and whilst firms had cover when they provided advice, many are unable to access insurance for subsequent years.72 This leads to firms being unable to pay compensation and forced …
HM Treasury