Fourteenth Report - Investigation into the British Steel Pension Scheme

Select Committee

Public Accounts Committee HC 251 21 July 2022

Report Status Government responded

Conclusions & Recommendations 23 items (5 recs)

Source View on Parliament website

Government Response (AI assessment · 23 of 23 classified)

Accepted 1

Accepted in Part 1

Acknowledged 15

Deferred 1

Not Addressed 2

Rejected 3

Government response

Treasury minutes: Government response to the Committee of Public Accounts on the Fourteenth report from Session 2022-23 · published 14 Oct 2022

Read the government response ↗ Response on the tracker

Recommendations & Conclusions

15 results

2 Recommendation Acknowledged

The Financial Conduct Authority has consistently been behind the curve in responding to the catastrophic...

Recommendation

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 … Read more

Government Response Summary

The FCA acknowledges that there are lessons to learn, but is concerned that the report does not fully acknowledge the ways the FCA has responded since 2017. The FCA will provide updates in line with the Committee’s recommendations and a response to some of the wider conclusions of the report in a letter dated 22 September 2022.

HM Treasury

4 Recommendation Acknowledged

The way that compensation has been provided in the British Steel Pension Scheme case has...

Recommendation

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 … Read more

Government Response Summary

The FCA has considered how further redress mechanisms can be implemented more quickly and provide fair compensation and its plans to improve the redress framework is in the FCA Business Plan for 2022/23, but it does not offer specific changes to resolve differences in compensation levels.

HM Treasury

1 Conclusion Acknowledged

On the basis of a report by the Comptroller and Auditor General, on 27 April...

Conclusion

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 … Read more

Government Response Summary

The government acknowledges the Committee's report and states it is the FCA’s response to the Committee’s report.

HM Treasury

7 Conclusion Acknowledged

The impact on members has been catastrophic, both financially and emotionally.15 Alongside losses caused by...

Conclusion

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 … Read more

Government Response Summary

The FCA acknowledges the catastrophic impact on members and shares concerns about unsuitable advice, referencing meetings with steelworkers and the consultation paper CP 22/6.

HM Treasury

8 Conclusion Acknowledged

The FCA failed to take swift and effective action at all stages of the BSPS...

Conclusion

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 … Read more

Government Response Summary

The FCA acknowledges that it failed to take swift and effective action at all stages of the BSPS case and shares concerns about unsuitable advice, referencing meetings with steelworkers and the consultation paper CP 22/6.

HM Treasury

9 Conclusion Acknowledged

The former Chief Executive of the FCA told us that, as the BSPS case unfolded,...

Conclusion

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 … Read more

Government Response Summary

The FCA agrees with the committee's recommendation and shares concerns about unsuitable advice, referencing meetings with steelworkers and the consultation paper CP 22/6.

HM Treasury

10 Conclusion Acknowledged

In response to the BSPS case, the FCA had to gather further evidence to understand...

Conclusion

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 … Read more

Government Response Summary

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 Acknowledged

The FCA implemented ineffective regulatory interventions in its initial response to the BSPS case.

Conclusion

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 … Read more

Government Response Summary

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 and have stopped firms providing DB pension transfer advice to BSPS customers.

HM Treasury

12 Conclusion Acknowledged

To date, the FCA has only issued one fine in response to the BSPS case.36...

Conclusion

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 … Read more 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) 25 C&AG’s Report, para 2.12, 2.13 26 Qq 45, 46 (27 April) 27 HC Work and Pensions Committee, British Steel Pension Scheme, HC 828, 15 February 2018 28 Q 76 (27 April) 29 Qq 19–22 (13 June) 30 Q 63 (27 April) 31 Qq 28, 109 (27 April) 32 Q 91 (27 April) 33 Qq 12, 13 (27 April) 34 C&AG’s Report, para 2.18 35 Q 29 (27 April) 36 C&AG’s report, figure 10 12 Investigation into the British Steel Pension Scheme as possible” these have been ongoing for years without progress. The former Chief Executive of the FCA noted that meeting the legal tests for conducting an enforcement case involves a long period of investigation and to rush this may risk losing the case.37 In this investigation period, the FCA does not publish lists of firms or advisers who are under investigation, so consumers are not aware, for example, when searching the FCA Register to find firms which have their permission. The FCA must look into whether it would be an option to publish lists of those under investigation, where there are significant grounds to believe they are committing serious harm to consumers. Two enforcement investigations have been reported publicly by the FCA; however, the remaining cases are subject to legal restrictions and obligations until final decisions are made.38 The FCA maintains a register of regulated advice firms and works to ensure that consumers can quickly identify where non-compliance has occurred.39 However, as unsuitable advice is linked to firms rather than individual advisers, consumers do not know which advisers have provided unsuitable advice.40 These issues risk signalling to consumers that the advice market is safer than it is and highlights the FCA’s failure to deter bad actors from operating within the market.41 This problem Show less

Government Response Summary

The FCA is able to provide a high-level update on enforcement activity related to BSPS, stating that enforcement activity related to BSPS is a high priority. The FCA currently has c.30 ongoing investigations into firms and individuals relating wholly or partly to BSPS advice and five of them have entered either Stage 1 settlement discussions or the Regulatory Decisions Committee.

HM Treasury

14 Conclusion Acknowledged

The FCA oversees the consumer redress process which intends to put consumers back into the...

Conclusion

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 … Read more

Government Response Summary

The FCA has considered how further redress mechanisms can be implemented more quickly and provide fair compensation. The FCA Business Plan for 2022/23 sets out its plans to improve the redress framework, including carrying out redress exercises with firms where appropriate, so they can quickly remedy harm.

HM Treasury

15 Conclusion Acknowledged

The FCA provides guidance on how compensation should be calculated and sets the rules for...

Conclusion

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 … Read more

Government Response Summary

The FCA states it will consider the Committee's feedback as part of its wider response to the BSPS redress consultation. The FCA explains its redress calculation methodology is designed to respond to changes in financial markets and produce an appropriate redress figure at the point at which the redress is calculated.

HM Treasury

16 Conclusion Acknowledged

Many BSPS members have not received the full amount of compensation owed to them due...

Conclusion

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 … Read more

Government Response Summary

The FCA states it will consider the Committee's feedback as part of its wider response to the BSPS redress consultation. The FCA explains its redress calculation methodology is designed to respond to changes in financial markets and produce an appropriate redress figure at the point at which the redress is calculated.

HM Treasury

17 Conclusion Acknowledged

The FCA and redress organisations worked to engage with and encourage BSPS members to seek...

Conclusion

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, … Read more

Government Response Summary

The FCA agrees with the committee's recommendation and describes its Business Plan commitments and engagement efforts with BSPS members and other consumer engagement methods.

HM Treasury

20 Conclusion Acknowledged

In direct response to the 2015 Act, the FCA announced a new starting position for...

Conclusion

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 … Read more

Government Response Summary

The FCA removed the starting position rule in October 2020, has found a deterioration in the quality of advice, and published CP22/6 which if implemented would require firms to review their advice and pay redress to consumers where that advice was unsuitable, and will publish a Policy Statement on this later in 2022.

HM Treasury

22 Conclusion Acknowledged

The standard complaints-based approach to redress, which relies on consumers seeking compensation themselves, has proved...

Conclusion

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 … Read more

Government Response Summary

The FCA agrees with the committee's recommendation and describes its Business Plan commitments and engagement efforts with BSPS members and other consumer engagement methods.

HM Treasury