Committee tells FCA to ban contingent charging
The Committee has told the FCA to ban contingent charging, which it claims is a “key driver of poor advice” in its report on the British Steel Pension Scheme.
“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 has also called 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.”
