A law firm representing steelworkers in the British Steel Pension Scheme (BSPS) saga has written to the Financial Conduct Authority (FCA), Financial Ombudsman Service (FOS) and Financial Services Compensation Scheme (FSCS) to raise concerns over the calculation of compensation owed to members.
While Clarke Willmott could not share the letters sent to the regulators as they are confidential, the communication sent to BSPS members, seen by International Adviser, outlines that the current economic conditions could impact how much redress they may be entitled to.
“The amount of redress is linked to the economic conditions prevailing at the time of the calculation,” the law firm explained.
“In very basic terms, based on the current methodology, the higher the rate of gilt yields then the lower the redress calculation will be. The gilt yields are linked to inflation, so if the rate of inflation is high then so is the rate of gilt yields.”
As the rate of gilt yields has reached highs not seen since the 1990s, lawyers said they have seen redress calculations “showing significantly less compensation is due than if the calculations were carried out 12 months ago”.
Consultation
The law firm added that basing calculations on the current economic landscape would be “very unfair”, but for the time being, redress is constrained by the FCA methodology.
As a result, Clarke Willmott has asked for an urgent meeting with the three bodies to find a solution where steelworkers will not be under-compensated due to the current inflationary climate.
The FCA said it is willing to meet and that the FOS and FSCS should be part of the conversation too, the law firm said.
At the same time, the FCA issued a consultation document to propose changes on how compensation is calculated – it will be open until 20 September 2022.
The law firm also intends to ask the FSCS and FOS to suspend complaints in progress at least until the consultation on redress calculation is completed, and that any changes to the methodology be implemented.
For those steelworkers who have had a recent FOS decision, the law firm would encourage businesses to either suspend calculations or to carry out a second one based on the updated methodology. The same would then apply for FSCS compensation already paid, and any potential top-up needed to be given to BSPS members under the updated methodology if it gets greenlit.
The FSCS and FOS declined to comment, while a spokesperson for the FCA told IA: “The FCA has recently carried out a review of the methodology for calculating redress for unsuitable pension transfer advice.
“While we concluded that the overall approach remains fit for purpose, we are currently consulting on some updates to ensure it continues to reflect actuarial best practice. We often meet with stakeholders as part of a consultation process to understand their views.”
IA also understands there will be a meeting in September where the law firm will sit down with all three bodies to discuss the matter at hand.
