CP22/15: Calculating redress for non-compliant pension transfer advice

Consultation opens: CP22/15
02/08/2022
02/08/2022
Consultation closes
20/09/2022

We are seeking views on changes to our methodology for calculating redress for consumers who suffered financial loss from transferring from a defined benefit to a defined contribution pension scheme following non-compliant advice. This includes former members of the British Steel Pension Scheme.

Read CP22/15 (PDF)

Why we are consulting

This Consultation Paper (CP) is about calculating redress for consumers who have suffered financial loss because of non-compliant advice to transfer from a defined benefit (DB) pension scheme to a defined contribution (DC) pension scheme.

We have carried out a periodic review of our methodology for calculating redress for consumers in this position. The methodology aims to put them, so far as possible, back in the position they would have been in if they had been given compliant advice and remained in their DB scheme. This is the basic objective of redress.   

Our review concluded that the current methodology remains appropriate and fundamental changes are not necessary. However, the review identified some areas where we could improve or clarify the methodology to ensure it continues to provide appropriate redress. This CP sets out proposals for these improvements, including: 

  • consolidating the methodology as rules and guidance in the FCA Handbook 
  • changing the approach to determining the consumer’s retirement date 
  • payment of redress and how it is explained to consumers 
  • how our proposals affect the proposed BSPS redress scheme   

Who this applies to    

This consultation will be of interest to:

  • regulated firms who provide, or used to provide, advice on transfers from DB pension schemes to personal DC pension schemes 
  • actuarial specialists who carry out redress calculations for regulated firms 
  • industry groups / trade bodies 
  • individual consumers, including BSPS members who transferred their pension, and their representatives 
  • consumer groups 
  • insurers who provide professional indemnity insurance (PII) for financial advisers

Background

Following our last review of this methodology, we published finalised guidance and said we would review the methodology every four years.  

In September 2021, we said we would start this periodic review of the methodology by the end of the year. In January 2022, we appointed Deloitte Total Reward and Benefits Limited (Deloitte) to conduct the review.  

We have published Deloitte’s Technical Report and Technical Manual, with worked examples, on our website. We also supplemented Deloitte’s review with external specialist legal advice

We are also using the findings and recommendations of the periodic review to inform the rules for calculating redress for consumers who were given unsuitable advice to transfer out of the British Steel Pension Scheme.   

Respond to this consultation

We are asking for responses to this consultation by 20 September 2022. Please respond by using the online form or email: [email protected] 

We recommend responding through the online form. You can also respond in writing to: Consumer and Retail Policy, Financial Conduct Authority, 12 Endeavor Square, London E20 1JN.   

Next steps 

This consultation will close on 20 September 2022. If we decide to make changes to our general approach and implement the proposed BSPS consumer redress scheme, we will aim to publish a Policy Statement (PS), including final rules, this winter.

We would expect any BSPS redress scheme to come into force in early 2023, with most members who are eligible receiving compensation later in 2023 or in early 2024.

Any changes to the methodology will apply to all cases that have not been settled when the changes come into effect. In the meantime, we expect firms to continue to calculate and offer redress in line with existing requirements. Until changes take effect, firms will need to explain to their customers how they have arrived at a figure, and how this puts them back in the position they would have been in, if they had not received unsuitable advice. Firms will also need to explain that customers have the option of waiting for the outcome of this consultation to settle their case.