UK regulators have imposed their first fine in a mis-selling scandal over British Steel workers’ pensions, ordering a financial adviser to pay almost £2.4m for “serious failings” and “tough” advice to consumers
The Financial Conduct Authority said on Friday that Pembrokeshire Mortgage Center had given “inappropriate advice” to consumers about moving out of the British Steel Pension Scheme and other high-value 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 pension benefits, worth £2.8 billion in total, to riskier schemes after seeking financial advice.
Welsh broker PMC, which closed in 2017, earned more than £2m in fees from advising 420 people on exiting their schemes, the FCA said.
While the regulator believes most people are better off not swapping a defined benefit pension, which provides a secure retirement income with inflation protection, for a cash lump sum, the PMC advised 93 per cent of the 420 people to transfer.
“The quality of the advice seen here was deplorable,” Mark Steward, the FCA’s executive director of enforcement and market oversight, said in a statement.
The brokerage provided insufficient justification or justification “using generic, painted advice that is not tailored to the specific circumstances of their clients, while earning fees doing so”, he added.
PMC’s liquidators did not immediately respond to a request for comment.
The company “was one of the worst offenders in the early days of the BSPS scandal and was shut down almost immediately in 2017”, said Al Rush, founder of Echelon Wealthcare and a campaigner for BSPS members affected by pension mis-selling. . “The fine is impressive but is bittersweet for steelworkers because they will not recoup their losses for being wrongly transferred.”
The payout for affected steelworkers was limited to £50,000 at the time because the brokerage went insolvent, Rush said. “Any money raised 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 plans.
Many of those who were informed “were in a vulnerable position due to the uncertainty surrounding the future of the BSPS and the short timescale in which 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 remediation costs at around £49m, down from an estimate of £71m earlier this year.
Additional reporting by Josephine Cumbo