The British Steel Pension Scheme mis-selling scandal shows need for tougher regulation - Greg Wright

Altogether, 7,834 of the 130,000 members chose neither of the two schemes and transferred their pensions out of the scheme completely. Many of these people were given poor financial advice and have lost vast amounts of their pension savings. The Financial Conduct Authority (FCA) concluded that 46 per cent of these transfers were based on unsuitable advice. A National Audit Office report found that a large number of BSPS members suffered a “significant degree of financial detriment” after transferring out of the scheme. While the total loss experienced by members is not recorded, for claims made to the Financial Services Compensation Scheme, the average individual loss is £82,600. The communication and support provided to vulnerable customers at the time of the BSPS restructuring was clearly inadequate.

To quote Gareth Davies, the head of the NAO, “The BSPS case demonstrates the costs and difficulties of remedying failures in financial services and the importance of preventing problems from occurring in the first place.”

The regulator is taking action on behalf of the victims. In 2022, the FCA said that more than 1,000 former British Steel Pension Scheme members are set to receive redress payments. The FCA has now censured Lighthouse Advisory Services Limited for “unsuitable advice” provided to people looking to transfer out of defined benefit pension schemes, including members of the BSPS, between 2015 and 2019 . During this period, Lighthouse advised 1,567 customers, 262 of whom were members of the BSPS.

Quilter Financial Planning Limited, which acquired Lighthouse in June 2019, after the unsuitable advice was provided to members of the BSPS, has taken responsibility for Lighthouse’s failures and carried out a redress exercise. It provided “very high levels of cooperation” to the FCA, replaced Lighthouse’s senior management team and changed its internal processes in relation to defined benefit transfer advice.

So how did things go so badly wrong? Lighthouse had two advisers partially based on site at the British Steel works in Scunthorpe. Many of the people Lighthouse advised were relying on their BSPS pension as their main source of retirement income. The FCA concluded that Lighthouse’s advisers did not challenge BSPS members’ reasons for transferring or properly consider alternatives to meet their retirement plans. In some cases, they failed to provide evidence as to why a transfer would be in members’ best interests. As a result of these failures 53 per cent of advice provided to BSPS members from April 2015 to April 2019 was unsuitable, according to the FCA. This scandal is a terrible warning from recent history. Perhaps it’s time to consider the most effective deterrent of all, a lifetime ban from working in financial services, for the worst offenders?

Greg Wright is the deputy business editor of The Yorkshire Post