Judicial review against the FCA regarding British Steel Pension Scheme redress
The regulation of the UK’s financial advice market should safeguard consumers from making poor financial decisions. However, for members of the British Steel Pension Scheme (BSPS) the advice market failed to protect them and caused serious financial harm. Advisers were financially incentivised to provide unsuitable advice. That led to approximately 7,800 steelworkers transferring out of their defined benefit (DB) pension scheme and as a result, losing an average of £82,600 in life savings, one of the UK’s worst pension scandals.
The Financial Conduct Authority (FCA) has adopted a standard complaints-based redress process to remedy the damage caused. However, the FCA’s redress scheme has been criticised by many, including the Public Accounts Committee, for being ineffective. Only 25% of members have raised complaints and many have not been compensated fully. The FCA has proposed a consumer redress scheme, however, fundamental issues with the new proposed scheme remain.
Hausfeld has been instructed by Alastair Rush, a longstanding campaigner in this area, to write to the Financial Conduct Authority (FCA) in the interests of a group of 324 steelworkers to articulate concerns with the calculation of redress for steelworkers who suffered from unsuitable advice. The letter, dated 28 September 2022, states that: “individually and cumulatively, these issues are causing grave disquiet within a close-knit community of steelworkers, already vulnerable given the original mis-selling already suffered”.
The letter requests that the FCA addresses the issues set out in the letter (including but not limited to the FCA’s use of a ‘point in time’ calculation methodology and how advisor charges, inflation, and early draw-down impact redress calculations) in its proposed consumer redress scheme and resolves issues regarding the redress awarded to BSPS members to date. If the FCA decides not to address the issues set out in the letter, there may be grounds to pursue judicial review proceedings.
Ned Beale, Partner, commented in the Financial Times: “the FCA is already defending a judicial review by MPs over flaws in the interest rate swap mis-selling redress scheme. The BSPS redress scheme also has flaws that, unless fixed, give grounds for judicial review. As the FCA continues to consult regarding BSPS, we have written to identity the scheme’s flaws and possible fixes, in the hope that the FCA uses this window of opportunity to avoid the need for legal action.”