UK regulators have imposed their first fine in a mis-selling scandal over British Steel workers’ pensions, ordering a financial adviser to pay almost £2.4mn for “serious failings” and “woeful” advice to consumers
The Financial Conduct Authority on Friday said Pembrokeshire Mortgage Centre had given “unsuitable advice” to consumers to transfer out of the British Steel Pension Scheme and other valuable defined benefit pensions.
The BSPS scandal, one of the worst of its kind, dates back to 2016 and 2018 when 7,700 members transferred their guaranteed retirement benefits, worth £2.8bn in total, to riskier arrangements after obtaining financial advice.
Welsh broker PMC, which closed down in 2017, earned more than £2mn in fees from advising 420 people on whether to transfer out of their schemes, the FCA said.
While the regulator believes most people are better off not swapping a defined benefit pension, which pays a secure retirement income with inflation protection, for a cash lump sum, PMC advised 93 per cent of the 420 people to transfer.
“The quality of advice seen here was woeful,” said Mark Steward, the FCA’s executive director of enforcement and market oversight, in a statement.
The brokerage gave inadequate justification or rationale “using generic, templated advice not tailored to the specific circumstances of their customers while earning fees in doing so”, he added.
PMC’s liquidator Menzies said it could not comment on the matter while its investigations into the company continued.
The company “was one of the worst offenders in the very early days of the BSPS scandal, and was closed down almost immediately in 2017”, said Al Rush, founder of Echelon Wealthcare and a campaigner for the BSPS members affected by pension mis-selling. “The fine is impressive but is bittersweet for steelworkers because they will not make up the losses for being wrongly transferred out.”
The payout for affected steelworkers was capped at £50,000 at the time because the brokerage went insolvent, Rush said. “Any money collected should go to the victims, not to the Treasury.”
The watchdog’s statement comes days after it confirmed details of a redress scheme for BSPS members who were wrongly advised to give up defined-benefit schemes.
Many of those advised “were in a vulnerable position due to the uncertainty surrounding the future of BSPS and the short timescale they had to make a decision”, the FCA said, but did not “receive the quality of advice they needed to make an informed decision”.
The FCA on Monday put redress costs at about £49mn, down from an estimate of £71mn earlier this year.
Additional reporting by Josephine Cumbo