When the financial historians come to write a chapter about the British Steel Pension Scheme debacle the word “shameful” is likely to be used.

Only now, several years after the worst cases of bad advice, are we seeing the true extent of the shameful behaviour that saw hundreds of workers lose out to bad advice.

In two cases this week the advisers were castigated as “incompetent” by the FCA.

It really beggars belief how they were able to collectively provide dismal, substandard advice to hundreds of clients. But the fault does not just rest with them. There must have been a small army of people at pension firms, SIPP providers, the regulators and other firms who were asleep on the job. Who was checking the advice is one question yet to be answered?

Some people must have seen dozens of cases of bad transfer advice and simply looked the other way.

It’s worth looking at the two cases adjudicated this week by the FCA which reveal some of the mis-selling that went on which saw so many BSPS workers lose out, many of them fearful they would all or part of their pension they had worked so long for.

In the first case, the FCA banned Mark Abley of County Capital Wealth Management and ordered him to pay £106,100 to the Financial Services Compensation Scheme.

The FCA said his Co. Durham firm, now in liquidation, advised nearly 600 people to transfer out of their defined benefit scheme, including almost 150 members of the BSPS. The regulator said in 56% of cases the advice given failed to meet the required standards and showed a lack of competence.

As of 14 March, the FSCS has upheld 53 Pension Transfer claims against CCWM and paid out more than £2.1m in compensation to customers of CCWM.

In the other case this week financial adviser Denis Lee Morgan was banned by the FCA from advising on pension transfers and opt outs following British Steel Pension Scheme advice failings. Mr Morgan, of Pembrokeshire Mortgage Centre Ltd (in liquidation), has also been banned from holding any senior management function in a regulated firm.

Staggeringly his firm, advised an average of 65 customers a month, mostly members of the BSPS, on pension transfers. The firm advised overall on an incredible £123m in pension transfers, with an average transfer value per customer of £293,000 (£314,000 for British Steel Pension Scheme members).

In most cases, the firm failed to consider the customers’ financial situation, retirement needs, their attitude to risk or that transferring would be in their best interests.

Mr Morgan personally received £1,368,608 from initial and ongoing advice fees with the FCA saying in its final notice that, “a significant proportion of Mr Morgan’s total income from the advice was attributable to his breaches.”

It’s no wonder that the Pembrokeshire Mortgage Centre was fined £2.354m in December for giving unsuitable advice to customers to transfer out of the BSPS and other defined benefit pension schemes.

The overall FSCS uphold rate on compensation claims against Pembrokeshire Mortgage Centre was 88%. The FSCS has so far upheld 213 claims against the firm and paid out over £13.3m in compensation. Had it not been for the FSCS compensation limit of £85,000, the total compensation payable to customers would have been £16.4m, the FCA said.

It’s easy to just talk about figures in these cases but we must bear in mind that each victim would have been left traumatised by the whole experience. Not knowing if they would have any pension to rely on in retirement. A nightmare scenario. If there is any comfort it is that at least the government-backed BSPS redress scheme, FSCS and others are returning much of the lost funds to BSPS members.

Ironically, as the FCA stressed this week, the root of the problem in these cases was the advisers’ lack of competence. They simply should not have been allowed to advise on pension transfers in the first place. To allow them to do so was a catastrophic error of regulation and the industry is paying the price, both reputationally and financially.

The lessons from this shameful period need to be learnt if the next chapter in the history of the advice sector is not to be equally grim. 

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Kevin O'Donnell is editor of Financial Planning Today and has worked as a journalist and editor for over three decades.