Wealth management trade body PIMFA has urged the government to compensate victims of the British Steel Pension Scheme from the Pension Protection Fund.

The body says that BSPS pension transfer victims should be transferred into the Pensions Protection Fund to ensure that they get the guaranteed income they had “wrongly” given up.

In its response to the FCA’s consumer redress consultation, PIMFA said past members of the British Steel Pensions Scheme should get the opportunity to be put back in the position they would have found themselves had they not transferred out.  

Thousands of BSPS members were persuaded to transfer their money out of the scheme, often by pushy advisory firms which have now failed in many cases.

Under the proposal put forward by PIMFA, advice firms would pay redress by topping up an individual’s pension provision to a level which would be invested directly into the PPF to ensure they received a guaranteed income for life. This would be equal to what they would have received, should they have gone into the PPF in the first place.

Simon Harrington, head of public affairs at PIMFA, said: “Given that the FCA considers the major driver of unsuitability to be an individual giving up their guaranteed income, it is our view that the fairest and most logical way to put the individual back in the position they would have found themselves in would be to replicate it. 

“Current proposals to provide the individual with a cash lump sum, simply perpetuate the problem of BSPS members having a cash lump sum which, in the FCA’s view, is unequal to the value of the benefits derived from a DB income.”

PIMFA also raised concerns about the influence of Claims Management Companies (CMC) encouraging large numbers of people to make claims against advice firms, even where those clients consider themselves to have had a good outcome by transferring out of the original pension scheme.

PIMFA also suggested that such a high-profile redress scheme should consider an opt in process as being more beneficial to firms and consumers alike as those who are most deserving of redress will be processed quicker and made good in a "more efficient manner." 

The trade body is concerned that an unintended consequence of the redress scheme could be the potential for CMCs to take advantage of cases where clients are referred to the Financial Ombudsman Service (FOS). 

While PIMFA believes it is right that clients are able to appeal against judgements, the uphold rates from the FOS as they relate to British Steel raise concerns they would clearly appeal to CMCs. 

An increased level of claims to be processed by the FOS will only contribute to an already slow process rate which will contribute to further uncertainty for consumers and firms who are subject to claims, PIMFA warns.

PIMFA is also concerned about the overall cost to firms of the redress scheme which could be significantly higher than the FCA has estimated. PIMFA raised concerns about how realistic it is for the FCA to expect Professional Indemnity Insurance (PII) providers to cover claims to the level the regulator has set out.