Rather than imposing financial penalties on firms, the FCA has ordered them to make payments to FSCS to make sure that those responsible for the wrongdoing pay the redress owed. 

Money paid out under the redress scheme is lower than predicted due to a variety of reasons including some poor advice not resulting in financial loss, rising annuity rates making compensation costs lower and about half the advice being suitable.

Overall, however, nearly half the pension transfer (49%) advice given by BSPS advisers has been labelled as “unsuitable,” the report confirms.

The FCA report says that in total £106m in redress has so far been offered to 1,870 former British Steel Pension Scheme (BSPS) victims to put them back in the position they would have been at retirement.

Much of the bill has been picked up by the industry via the Financial Services Compensation Scheme and the Financial Ombudsman Service. Many BSPS adviser firms have failed.

The FCA said in its report: “Since we introduced the redress scheme, the expected cost of funding a guaranteed retirement income through an annuity has fallen. We understand some former BSPS members will be disappointed to have received no, or less, redress than they were expecting.

"Redress aims to ensure, as far as possible, that former members are put back in their original financial position. So, some former members have received unsuitable advice, but not been offered redress, as they have not lost out financially.  

"Where firms that provided BSPS advice have gone out of business, FSCS has attempted to contact customers. We encourage any former BSPS members who have either not yet had their advice reviewed or not yet received the result of their redress calculation, to check if the firm that gave them advice has gone out of business, and if so, to make a claim with FSCS. “  

The FCA reported that so far 15 individuals have been banned from working in financial services or holding a specific role following BSPS investigations.

While fines or redress payments to the FSCS total £8.87m some of them are being appealed, the FCA said. The regulator says it continues to pursue those who gave poor advice.

The British Steel Pension Scheme was restructured in 2017 when around 7,700 members decided to transfer out of the scheme after receiving advice.

The FCA estimates almost half (46%) of this advice was unsuitable and the poor conduct by some advisers caused, “significant harm and distress,” the FCA said.

In terms of the assessment of advice:

• 1,073 people (49.1%) had their advice assessed as suitable
• 1,079 people (49.4%) had their advice assessed as unsuitable
• in 34 cases (1.6%) there was missing information, which prevented the firm from making an assessment

Reaction from the industry was one of surprise and disappointment that compensation was not better for the victims.

Brian Nimmo, head of redress at pension consultant Broadstone, said: “Many ex-British Steel Pension Scheme members will have entered the redress scheme with expectations of receiving life changing amounts of compensation. It is unsurprising that they will have been left bitterly disappointed if they received nothing at all. There is a glaring disparity of outcomes depending on when each individual was assessed for loss with those waiting for the FCA’s redress scheme typically receiving far less compensation than those who received compensation earlier.

“Average compensation for those who received it before the FCA’s redress scheme started was over £60,000 whereas for those assessed in the redress scheme, only 360 received any compensation and over 1,700 who had their advice assessed as unsuitable, received no compensation at all. As early as July 2022, it was clear that the changing market conditions meant that redress levels were falling drastically.

“It highlights the importance of keeping consumers informed and up to date with the latest developments as expectations could have been better managed throughout this process. That so many consumers will be potentially disappointed with the outcome risks undermining the laudable aims the redress scheme set out to achieve.”