The British Steel Pension Scheme (BSPS) has been the centre of a significant financial redress effort whereby over £100 million was offered to former members in compensation who were impacted by poor financial advice.
As of July 2024, £106 million in redress has been extended to 1,870 former BSPS members to help restore their retirement savings to the levels they would have expected had they stayed in the scheme.
The redress effort has been a collaborative process involving the Financial Conduct Authority (FCA), the Financial Ombudsman Service (FOS), and the Financial Services Compensation Scheme (FSCS). Together, these organisations have supported over 6,500 former BSPS members who transferred out of the pension scheme, often based on advice that has since been deemed unsuitable. The goal has been to ensure these individuals are put back in the financial position they would have been in if they had not received poor advice.
Redress for former BSPS members is calculated based on the funds needed to top up a personal pension to the point where it could purchase an annuity providing an income similar to what they would have received from the BSPS. Initially, it was estimated that up to £50 million would be required from firms or the FSCS to compensate members. However, due to changing economic conditions, the actual amount paid out so far has been £8.7 million, significantly lower than expected.
This reduction is largely due to a decrease in the cost of funding a guaranteed retirement income through an annuity, meaning that less money is now needed to provide the same level of retirement income as before. While this is positive in terms of reducing the overall cost, it has resulted in some former members receiving less redress than they anticipated, or none at all if it was determined that they did not suffer a financial loss.
As the redress scheme draws to a close, the FCA has highlighted the importance of former BSPS members checking whether their advice has been reviewed and whether they have received the outcome of their redress calculation. If the firm that provided the advice has gone out of business, affected members are encouraged to make a claim with the FSCS to ensure they receive any compensation they are entitled to.
The FCA continues to take action against those responsible for the poor advice that led to these issues. So far, 15 individuals have been banned from working in financial services, with fines and payments to the FSCS totalling approximately £8.87 million. In some cases, the FCA has opted to prioritise payments to the FSCS over imposing fines, ensuring that the funds go directly to compensating the affected members.
While the total redress compensation paid out is lower than initially expected, the scheme has provided significant support to those impacted. Former members are urged to ensure their cases have been reviewed and to pursue compensation through the FSCS if necessary.