Source · Select Committees · Public Accounts Committee

Fourteenth Report - Investigation into the British Steel Pension Scheme

Public Accounts Committee HC 251 Published 21 July 2022

Report Status

Government responded

Conclusions & Recommendations

23 items (2 recs)

Source

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Government Response

AI assessment · 2 of 23 classified

Acknowledged 1

Rejected 1

Recommendations

1 result

6 Rejected

The current compensation arrangements do not always protect consumers, can create wider costs to firms...

Recommendation

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 … Read more 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 advice have raised claims with redress organisations. Similarly, despite the redress process being free to use, 72% of complaints to the Financial Ombudsman and 40% of claims to FSCS being made through third party representatives such as claims management companies and solicitors. This points to the general complexity of the redress system and the FCA’s failure to recognise the specific vulnerabilities of BSPS members that prevent them from seeking compensation directly. For redress arrangements to work effectively firms should have PII cover to afford the cost of compensation, however many advice firms are unable to access the insurance and, since 2018, 60% of firms have left the DB pension transfer market entirely. For firms that have entered insolvency, compensation is funded by an FSCS levy, which forces compliant firms to shoulder the cost of unsuitable advice. Given that the Financial Ombudsman is dealing with a significant backlog of complaints and the FSCS levy is forecast to increase to £406 million in 2022–23, the redress system may not have the capacity to respond to further instances of significant consumer detriment within financial services. Recommendation: The FCA, FOS and FSCS should write to the committee in 6 months to explain what they are doing to manage risks in the redress system for financial service. The FCA’s handling of the wider DB pension market should be reviewed as there could be thousands more cases of mis-selling which may be eligible 8 Investigation into the British Steel Pension Scheme for financial redress, given the significant amount of unsuitable advice seen across the sector. The review should include consideratio Show less

Government Response Summary

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 of the wider DB transfer market.

HM Treasury

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