Recommendation 23

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 to enter insolvency. Since 2018, 60% of firms have left the DB pension advice market entirely. For insolvent firms, compensation is funded by an FSCS levy, which forces compliant firms to shoulder the cost of unsuitable advice. Given the levy is forecast to increase to £406 million in 2022–23, and the FOS is dealing with a significant backlog of 34,000 complaints, the redress system may not have the capacity to respond to further instances of significant consumer detriment within financial services.73 Given this compensation is a remedy for consumers who have faced financial detriment, alternatives to the industry-wide levy must be considered for a potential situation where the levy is insufficient to pay out compensation to those who are eligible. 66 Q 10 (27 April) 67 Q 55 (13 June); C&AG’s Report, para 3.11 68 Qq 58, 75 (27 April) 69 Q 26 (27 April) 70 Q 45 (27 April) 71 Qq 94, 95 (27 April) 72 Q 101 (27 April) 73 Q 92 (27 April); C&AG’s Report, para 3.12, 3.13, 16 Investigation into the British Steel Pension Scheme