The Pensions Regulator and Financial Conduct Authority have faced fresh criticism from the Work and Pensions Committee over their action in relation to the British Steel Pension Scheme.

Publishing its sixth report on the BSPS, the Committee chair Frank Field said The Pensions Regulator has once again been “fiddling while Rome burns”, when it should have seen this rip-off coming.

“Given a choice between two defined benefit options worse that what they had been promised, with precious little support in making that choice, many steelworkers were drawn to the superficially attractive third option. This is the first deal like this, but there will be more.

“All the responsible authorities must act, now, to stop more people being cheated. We will be asking all those involved to report back to us on the changes they will make, promptly, to stop this happening again.”

As a result, the Committee has called on TPR to conduct a review, listening to BSPS members and learn the lessons of how they were let down. To prevent another BSPS happening again, TPR has also been urged to ensure all schemes in future are equipped to give members a full picture of the options they are choosing between.

Field said of the FCA that it has been “rejigged and rebranded” but he cannot see much evidence of it working better for the people it is meant to protect.

He also questioned “whose side they’re on” as he referenced the FCA’s proposal to abandon the adviser presumption against transferring out of “gold-plated, stable, indexed pension schemes”. As part of its report, it has suggested the FCA do not bring in these proposals, as it “looks reckless” in light of the BSPS case.

The Committee has also told the FCA to ban contingent charging, which it claims is a “key driver of poor advice”.

“Genuine independence is not compatible with a charging model that only rewards advisers for recommending a particular course of action,” the report said. The FCA has also been advised to create an online register of advisers and their current status in providing advice that does not require “a degree and orienteering skills” to use.

The Committee also calls on the government to bring forward proposals for a system of deemed consent in the long awaited white paper on DB pension schemes. This should enable the bulk transfer of members from a DB scheme, certain to enter the PPF, into an alternative scheme providing unequivocally better benefits than the PPF to those members.

The report said such a system would have been of benefit to many of the 25,000 BSPS members - many of them old and frail - who did not respond to the scheme consultation.
Since the Committee’s inquiries into BSPS began, the FCA has gradually picked off firms providing unsuitable advice to BSPS members, and announced a review of all UK firms providing DB transfer advice. The Committee welcomed this but said it is too late for BSPS members

In response, a TPR spokesperson defended itself and said it “fulfilled” its primary role by evaluating and approving this complex restructuring of the BSPS including obtaining £550m for the scheme.

“As part of this rare restructuring, which prevented the company becoming insolvent, a new pension scheme was offered to members as an alternative to entry to the PPF. We believe this was the best possible outcome for everyone involved in what was a very challenging situation, bringing greater certainty for thousands of scheme members.

“We also helped tackle unscrupulous financial advisers who were exploiting the situation and the current high transfer values available by working closely with the scheme trustees, the FCA and The Pensions Advisory Service (TPAS). We went to Port Talbot and took part in a discussion forum with scheme members and others.

“We reviewed communications sent to members and were satisfied they adequately warned of the dangers of transferring out of a DB Scheme. And, while TPR does not regulate financial advice, we wrote jointly with the FCA and TPAS to members to flag potential risks. We note the committee’s recommendations and are continuing to work more closely with the FCA to protect pension savers.”

An FCA spokesperson said: “The FCA agrees with the Work and Pensions Committee that DB pension transfers are a very important issue. We have been carrying out considerable work within our remit on DB pension transfer advice. We have also taken detailed, extensive and robust action on the BSPS to help steelworkers and we are pleased this has been recognised.

“We believe the Committee’s recommendations are sensible. We are currently looking at the Register to see how we can make it easier to use. We are also reviewing the rules that apply to firms advising on pension transfers, and will consider this report as part of this. The FCA remains focused on ensuring consumers are protected.”

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