Echelon Wealthcare principal Al Rush is looking to get the Financial Regulators Complaints Commissioner (FRCC) to investigate the Financial Conduct Authority.
In an email dated 22 January to FCA chief executive Nikhil Rathi, Rush called the nature of the FCA’s errors in the case of the British Steel Pension Scheme (BSPS) “systemic”.
He argues those errors were “avoidable” and their impact is “catastrophic”.
He wrote: “The thrust of my complaint is that due to internal FCA shortcomings, steelworkers have found themselves needlessly in a protracted and calamitous situation not only not of their choosing, but one which was avoidable and preventable in the first place.
“They have suffered financial loss and stress that no steelworker should have to bear. I accept that the FCA did not create the scandal of BSPS, but despite having the opportunity, the capability, and dare I say it, the genuine intent from many individual employees to help, its corporate behaviour contributed and aggravated the factors which not only allowed it to happen in the first instance, but then for the impact to worsen.”
Rush previously considered launching a judicial review into the BSPS redress scheme. Yet, he explained to Money Marketing that he thinks a judicial review might not be in the steelworkers’ best interests.
He said: “What we’re going to do is suggest that the FCA is investigated. I would rather do that than the judicial review.
“If I wanted to place a judicial review, I think it is going to cause more uncertainty, a lot more confusion and a lot more worry for people. I think some steelworkers for their own medical health need to move on with this now.”
Rush said in his email to Rathi that he will advocate the creation of a BSPS compensation fund with the assistance of the Treasury.
“I will be advocating the creation of a BSPS compensation fund with the assistance of the Treasury, to ensure these men and women are not left out of pocket and to reflect the levels of stress they have endured,” he wrote.
Rush also argued that BSPS is not a one-off issue and that the FCA’s corporate behaviour caused harm to consumers in previous cases. He listed London Capital & Finance (LCF), Keydata, Blackmore Bond, Connaught, LIBOR and the Banking Swaps scandal for business owners as examples.
In addition, Rush quoted remarks within the PA Consulting Services report on Supervision from July 2016, which was subsequently released in a bundle in support of the Gloster Report into LCF.
He argued that these remarks may explain why the FCA did not react when the problems of BSPS first became suspected in Summer 2017.
Rush wrote: “It was not until executive director Megan Butler was publicly criticised in front of Frank Field MP and the Work and Pensions Select committee for not even knowing which advisory companies were (at that time) implicated in ‘BSPS’, that she finally agreed to visit Port Talbot to discover what was going on. By that time, it was already too late.
“Yet it was still not for a further five years, in 2022, after investigations by the National Audit Office and the Public Accounts Committee, did the FCA finally consult regarding a redress scheme, despite initially and repeatedly saying one was not required.
“The scheme itself has deep flaws, and due to many advisers bringing their (permitted of course) concentrated fire to bear, they are able to argue it should now be discarded completely, due to the impaired cost effectiveness of such a scheme, based on compensation being determined by current prevailing economic conditions which are resulting in very low, or zero sums of compensation being awarded.”
Rush said that the repeated failings of the FCA are beyond “inadvertent, understandable and forgivable shortcomings”.
He added: “Repeated mistakes, delays and multiple examples of bad leadership have resulted in far worse stress and financial loss for thousands of families.
“We do not know to what degree these men and women will have their retirements impaired and endangered by the actions and omissions of the FCA on top of the bad advisers who they trusted.
“But that steelworkers have lost money is beyond doubt and that they have suffered stress and inconvenience is beyond doubt. But if the FCA had dealt with this properly in 2017/2018 when asked, instead of finally agreeing in 2022 after a delay of five years, the losses experienced would be far less.
“You are financial professionals and financially literate, you will not suffer the same assault on your pension as did those men who looked to you, over the horizon, for help. Steel working communities across England and Wales, and Scotland, will be paying for your oversights, failings and omissions for decades to come.”
The FCA told Money Marketing that it considers each complaint individually and cannot comment on the specifics of Rush’s letter at this time. It recognises, however, the harm the circumstances of BSPS caused to steelworkers and their communities.
A spokesperson for the FCA said: “We have taken a wide range of actions in response to BSPS, starting with on the ground events for advisers in 2017 as well as engaging directly with consumers over the last few years.
“Over £20m of redress has been paid out by firms due to the action the FCA has taken, and in November [2022] we confirmed our plans for a consumer redress scheme, paid for by firms, specifically targeted at helping those consumers who haven’t yet complained to have their case reviewed and have redress paid where it is owed.
“We have also implemented changes in how we work with other organisations in this area to share information and intelligence.”
The FCA also said that it has acted to raise the standard of pension transfer advice more generally by introducing new rules.
And also by working with partners to ensure that consumers are supported to make decisions about their pension.
“We have said previously that we have learnt lessons, both for how we operate as a regulator, and for how the wider pensions regulatory system serves to protect consumers,” the FCA spokesperson added.
The FRCC has no powers of enforcement. The FCA is therefore free to reject and take no action on any recommendations he may make. It’s done so in the past.
Everyone (with any sense) knows that the “blame” for the BSPS mess lies with the Pensions Regulator, the Trustees and Tata, not the FCA, who have been tasked with cleaning up the mess.
Economic conditions, with artificially low interest rates contributed to artificially high CETVs in many cases. The FCA have alluded to this. (Even Martin Wolff and Baroness Altman have transferred out of DB schemes with interest rates so low and CETVs so “high”)
With interest rates back to more normal levels, annuity rates now at a thirty year high, this means most of the 8,000 ex BSPS members who transferred can secure a guaranteed income with their pension pot which is at least equivalent to what they’ve given up.
No loss, no compensation and no fees to be paid to those who promised everyone “cash justice”. It can feel unjust (for the members) as some ex BSPS members got extra cash because they pursued compensation without waiting for the FCA scheme or obtained a payment last year (and before) via FSCS with the advisory firm declared in default. Artificially low interest rates meant they got a payment as the variables used in the calculations were artificially low.
Again, everyone (with any sense) knew what the impact of rising interest rates would mean for the ex BSPS members (and everyone else) and potential compensation – no loss. That’s exactly what the current FSCS calcs say – no loss – and some of the ex members of BSPS don’t like it because their friend got a payment last year and that is understandable if their adviser has not managed their expectations. (Hopefully the ex BSPS members waiting on the FCA scheme have had regular updates from their advisers explaining what rising interest rates would mean for them – i.e. you can buy an equivalent annuity and won’t have lost anything).
And we should all be thankful that several thousand ex BSPS members who thought they had cause to complain are now able to purchase a guaranteed income via an annuity which is at least equivalent to the very valuable income they thought they had lost. Surely that outcome is what matters most – these individuals can take their £650,000 pension pot and buy an index linked annuity to replace the guaranteed income from BSPS they valued so highly.
(Certainly those of us that pay PI premiums and FSCS levies are very grateful for that)
And all those Auto Enrollment clients of Lloyd’s Bank, locked in to the Scot Widows Protection Fund, down 36%,Please remind me, Can they complain!!! Fintech have just confirm it will takea an 71 year old, 14 years to make up the loss, these BSPS people! are not alone!!!
The FCA should have insisted that the vote for the creation of BSPS2 be held before a final vote has taken. This was clearly overlooked by them when agreeing the scheme and voting, which they had an active role.
The FACT, advisers HAD to advise on three options, one, BSPS2 was NOT Guaranteed until voting closed, put EVERY adviser on a catch 22.
Had any adviser advised BSPS2, which then was NOT created after voting closed, would have been facing claims. Hindsight regulators state it was REASONABLE to ASSUME, in LAW it is black and white, there is NO reasonable.