52.Megan Butler told us that the FCA’s interest in transfers from the BSPS began in October 2017 when it “became obvious [ … ] that there were particular issues on the ground”. They began liaising with TPR on the issue in early November. They then held four seminars in Swansea and Doncaster with firms who specialise in pension transfers, to remind them of regulatory requirements around advice and working with introducers, and to gather intelligence. 151 regulated advisers attended these meetings and the FCA wrote to a further 148 in the areas affected.
53.Following “an extensive evidence-gathering exercise” on BSPS transfers, the FCA contacted 109 financial adviser firms, of which they requested further information from 66 and then conducted detailed reviews of the case files of 22. Eight of those firms, starting with Active Wealth in November 2017 and seven others over the course of December, have “voluntarily” suspended their permissions to provide DB transfer advice. This action followed “conversations with the FCA”. By 18 January 2018, the FCA’s information gathering and compliance activity had encompassed 1,766 of 2,054 transfers. Separately, on 18 January, South Wales Police announced that it was investigating whether BSPS members had fallen victim to pension fraud, including through being deceived into investing money in high-charging funds.
54.The FCA told us that they had “intervened as early as we could to gather information” and had “taken action quickly on the areas we regulate”. Witnesses were, however, critical of the speed of their response. Though one in six of all deferred BSPS members, 7,000 people, requested CETV quotations between April and September 2017, Derek Mulholland told us that the FCA did not contact the scheme offices until November 2017. Al Rush said that it was “depressing” that the FCA has acted with “such torpor” and added that they were slow to act on his evidence of unsuitable advice. A BBC News team investigating the BSPS scheme told us they presented evidence about Celtic Wealth and Active Wealth in September 2017. The FCA did not first contact Active Wealth in relation to BSPS transfer activity until two months later, when the Time to Choose exercise was well underway. The FCA assured us on 18 January 2018 that “our work on BSPS is not finished, and we are continuing to take action where we have concerns”. This will, of course, come as little comfort to BSPS members who regret their transfers or suspect they were poorly advised.
55.The FCA has been gradually picking off firms who were providing unsuitable advice to BSPS members. This action is welcome, but it came far too late for the vast majority of members who transferred their pensions. While heightened interest transfers began in April 2017 and peaked with the Time to Choose exercise from October 2017, suspensions of FCA firm permissions did not begin in earnest until December 2017. FCA action followed a determined campaign by steelworkers and good Samaritans, substantial media coverage, our select committee work and intervention by local MPs. The delays were partly a problem of coordination—the trustees are responsible for safeguarding the interests of scheme members and TPR is responsible for ensuring that task is performed appropriately with adequate support. They ought to have ensured the FCA was informed and pressed to intervene quickly. The FCA has long been aware, however, of problems with DB transfer advice. They should have been monitoring the developing risks surrounding the BSPS and intervened earlier to protect members against unsuitable advice.
56.On 21 December 2017, the FCA told us that, in 2018, it would “be collecting data from all firms who hold the pension transfer permission with the intention of assessing practices across the entire market”. We welcome the FCA’s decision to review the entire DB transfer advice market. It must be prepared to act decisively to protect consumers.
57.The FCA’s online register is the main public source of information about firms it regulates. It sets out what services financial advisers are authorised to provide and any regulatory action being taken against them. BSPS trustees and members were both reliant on the register to identify which firms could conduct pension transfer business. Both, however, said it was difficult to use. Rich Caddy told us that the complex system of menus and drop down boxes meant “you need some sort of degree to find a suitably qualified financial adviser”. The Personal Investment Management & Financial Advice Association (PIMFA), a trade body, criticised the register for its “inadequate” search facility and excessive use of “regulatory jargon” in the register entries.
58.PIMFA also criticised the information provided on individual advisers, observing that “a consumer seeking advice on a DB transfer would not know from the register if their adviser was authorised and permitted by their firm to provide this service”. Al Rush told us that steelworkers did not trust the FCA register, partly because “many advisers who act in a scurrilous manner” appeared on it.
59.Suspensions from the register are not routinely publicised by the FCA. The layout of their register also means it is not immediately apparent to the layperson that a firm’s permissions have been restricted. Surprisingly, even the FCA itself was unable to readily list the firms that had been subjected to DB advice restrictions in evidence to us.In the register, an entry for a firm whose pension transfer permissions were suspended reads prominently “Status: Authorised - This is a firm that is given permission to provide regulated products and services”:
Figure 1: FCA register entry for firm subject to a permission restriction
Scrolling down, the user finds a list of basic details of the firm which includes a restatement that the firm is “Authorised [ … ] given permission to provide regulated products and services” but with no indication that the firm is subject to specific restrictions. The user has to scroll further down to the bottom and open the box “Permission”:
Figure 2: example of FCA register entry of firm subject to a permission restriction VREQ - box marked ‘Permission’
Inside the “Permission” box, a Requirements box, which mentions the restriction, provides further details.
Figure 3: example of FCA register entry of firm subject to VREQ: first allusion to VREQ is “firm to cease advising on new pension business”.
Megan Butler acknowledged that website required improvement. The FCA have begun examining how to make the register easier to use.
60.The FCA online register is a potentially valuable resource but is currently very confusing. Vital consumer protection information, such as the suspensions of permissions, must be given far greater prominence. The FCA has rightly acknowledged it must improve its website. We recommend that the FCA name firms and individuals suspended from providing pensions advice. It should take immediate action to make such suspensions clear at the top of register entries and in search results. We further recommend that it publish its broader plans to redesign the register.
61.In its June 2017 consultation paper on transfer advice, the FCA reiterated its view that staying in a DB pension will be “in the best interests of most consumers”. This view is shared by TPR and the PPF. Despite this, the FCA proposed to remove the requirement that the adviser starts with the assumption that a transfer would be unsuitable for the client. It argued that the increased flexibility available under pension freedoms “had altered the options available and for some consumers a transfer may now be suitable when it wasn’t previously”. Henry Tapper told us that a good transfer adviser should ask clients “what makes you special?”, putting the onus on them to explain how they think they can secure more favourable terms outside their DB scheme.
62.Transferring out is not in the interests of most DB scheme members. Advisers should start from the presumption that it is a bad idea for their client, and be able to justify clearly a change of mind. In the light of the BSPS experience, the FCA’s proposal to remove that safeguard looks reckless. It should be abandoned.
63.In October 2017, the FCA published revised guidance on redress for customers who acted on unsuitable advice to take a DB transfer. It is not possible to reverse a DB transfer. The objective of the redress, however, is to put the customer, so far as possible, into the position they would have been in if they had not received the advice. The redress calculation should reflect the features of the customer’s original DB pension scheme, including appropriate benefit reductions should the scheme, like the BSPS, enter the PPF.
64.If the customer has lost money because of unsuitable advice, their first step is to complain to the advisory firm. If they are not satisfied with the firm’s response, they can refer their complaint to the Financial Ombudsman Service (FOS), which can require the firm to pay compensation. If the firm is insolvent and cannot pay compensation, the Financial Service Compensation Scheme (FSCS), which is funded by an industry levy, can pay out up to £50,000.
65.BSPS members who took a DB transfer on poor advice can seek redress. Ultimately, some bills may end up being footed by reputable advice firms through a compensation levy. Financial compensation for steelworkers will not, of course, make up for the sense of betrayal many feel for how they have been treated.
141 (Megan Butler)
142 (Megan Butler)
143 ; (Megan Butler)
144 FCA statement (11 December 2017) ; (Megan Butler); , 18 January 2018
145 , 18 January 2018.
146 , .
147 Active Wealth (UK) Ltd (FRN 631415); Pembrokeshire Mortgage Centre Ltd (trading as County Financial Consultants) (FRN 479220); Mansion Park Limited (FRN 209313); Vintage investment Services Ltd (FRN 142806); Retirement & Pension Planning Services Ltd (FRN 542640); West Wales Financial Services Limited (FRN 756482); Bartholomew Hawkins Ltd (FRN 489590); Inspirational Financial Management Ltd (FRN 223511).
148 , 18 January 2018
149 , Financial Times, 18 January 2018
151 (Derek Mulholland)
152 Written evidence from Alistair Rush ()
153 , question 9.
154 , 18 January 2018
155 , 21 December 2017
156 (Derek Mulholland)
157 (Derek Mulholland); Written evidence from British Steel Pension Members Group ()
158 (Rich Caddy)
159 PIMFA (30 October 2017)
160 PIMFA (30 October 2017)
161 Written evidence from Alistair Rush ()
163 , Channel 4 News, 13 December 2017
164 , 21 December 2017
165 , FCA consultation paper (21 June 2017), para 3.11
166 TPR (April 2015) Written evidence from the PPF ()
167 , FCA consultation paper (21 June 2017), para 3.11
168 (Henry Tapper)
169 FCA, FG17/9: , October 2017
170 FCA, FG17/9: , October 2017
171 Money Advice Service
9 February 2018