The U.K.'s Financial Conduct Authority said Wednesday that it will start the process of redressing British Steel Pension Scheme participants who received "unsuitable" pension transfer advice before the pension fund was restructured in 2018.
The FCA is gathering evidence and expects to have a compensation plan by March, according to a statement on its website.
In 2017, the Pensions Regulator allowed British Steel Pension Scheme to be spun out from sponsoring employer Tata Steel. In 2018, 86% of British Steel scheme participants voted to move to a new pension fund, the £14 billion ($19 billion) New British Steel Pension Scheme, London. Remaining participants were transferred to the Pension Protection Fund, London.
Before the transfer was completed, the FCA estimated that 3,437 British Steel members were advised to transfer out of their DB pension scheme between March 2017 and March 2018, with an average transfer value of £405,000. The FCA found that 47% of the advice "appeared to be unsuitable."
The FCA's redress plan would be limited to the transfer advice.
"BSPS is a highly exceptional case with the FCA's analysis indicating significantly more unsuitable advice (47%) than observed in reviews of higher-risk firms in non-BSPS cases (17%)," the FCA statement said.
The FCA also warned the financial advisers involved to prepare to accept responsibility and have adequate resources to cover the losses.
In a letter to CEOs of the adviser firms, Sheldon Mills, FCA executive director for consumers and competition, said, "We expect you to be accountable for the actions your firm takes in response to this letter."
The redress scheme would require advisers involved to review their advice.
"If the advice is unsuitable and resulted in a financial loss for former British Steel Pension Scheme members, the firms would be required to provide compensation," Mr. Mills also said in the letter.
