British Steel Pension Transfer Claims
Specialist Reports for use in Defending Against Defined Benefit Transfer Complaints
The FCA are in the process of implementing a redress scheme that aims to compensate members who transferred out of the British Steel Pension Scheme.
They have sent numerous letters to former scheme members that act to encourage them to submit complaints, whether or not they have a valid complaint.
With British Steel pension transfer claims, many of the members who raise a complaint do so with the thought of it being “Free Money” and they have nothing to lose. However, we all know the burden that falls on the Advisor in defending such claims and potentially having to pay compensation that is deemed due.
We believe that the FCA methodology will give rise to many incorrect decisions being made and can have severe consequences for the advice practice.
When compensation is deemed to be payable for British Steel pension transfer claims, the current method of redress is in our opinion, not fit for purpose. Any redress paid should be used to put the member back in the position, as far as possible, that they would have been in had they not transferred out.
In an ideal world, the redress would be used to reinstate the member back into the pension scheme from which the transfer took place.
However, it is noted that the British Steel Pension Scheme no longer exists and at the time of transfer the member could have chosen to have benefits in the BSPS 2 or the PPF.
The only way to fairly compensate a member is to try and replicate the benefits of one of the two replacement schemes, this can be achieved via a reinstatement into the scheme or by purchasing an annuity that matches the missing benefits as closely as possible.
Whilst reinstatement into either of the 2 replacement schemes isn’t currently available, there is a precedent for such actions: during the mid-1990s there was an industry-wide pension review exercise in which many schemes offered the option of reinstatement, and we believe that this option should be the primary objective of any redress scheme involving British Steel pension transfer claims.