The Financial Services Compensation Scheme (FSCS) is looking to compensate former members of the British Steel Pension Scheme (BSPS) for upfront costs associated with the advice they received to transfer their pensions from advisory firm Active Wealth.
Financial advisers flocked to Wales to encourage steelworkers to transfer their defined benefit pensions to other investment after British Steel announced that it was closing its existing scheme.
The result was that a lot of people ended up investing their money in self-invested personal pension schemes (Sipps) that held esoteric, high risk overseas funds.
On Friday, the FSCS confirmed that it has changed its stance with regard to compensating the upfront costs of reinvesting for scheme members who remain in Sipps wrongly recommended by Active Wealth.
In addition, where the compensation scheme has already decided on claims based on out-of-date values of the retained investments, it will revisit them to ensure an up-to-date transfer value is used in its calculations.
Mark Neale, FSCS chief executive, said: “We have strong sympathy for the plight of the members of the defined benefit pension schemes who were badly let down by Active Wealth and other advisers. We want to achieve fair compensation for them and hope these changes to our approach will go some way to helping them get back on track.
“We are also keen to hear from any BSPS member advised by Active Wealth who has yet to make a claim to FSCS – we are a free service to consumers, and stand ready to help.”
The FSCS has not, however, changed its approach on most issues, as it declined to alter its stance on compensating for ongoing adviser charges.
“We have considered this very carefully but have decided not to change our approach in this area,” it said.
“Our remit is to put people back in the position they would have been had they not been mis-advised rather than compensate for the costs of future investments and any advice charges associated with them.
“To provide fairness and consistency with all other claims we do not therefore believe it is appropriate to fund new, ongoing costs.”
Active Wealth is not the only advice firm that wrongly advised steelworkers to transfer their pensions but it is the only company mentioned in the update from the compensation scheme. This means that anyone who transferred under advice from another firm may not be eligible to apply for this compensation.
Last year, FSCS declared Active Wealth in default, as it was unable to pay claims against it.
To date, FSCS has paid around £1.1m ($1.4m, €1.22m) in compensation to former Active Wealth clients, including former BSPS members.