The Financial Services Compensation Scheme has opened the door to compensation claims against three failed financial adviser firms who arranged pension transfers for members of the British Steel Pension Scheme (BSPS).
Claims against just one of the firms could run into hundreds of thousands of pounds, said one accountancy firms involved in assessing the fall out.
The three firms being declared in default by the FSCS are: West Wales Financial Services Ltd, AW Dallas Financial Services Ltd and Fortuna Wealth Management Ltd.
West Wales Financial Services was one of 10 firms first asked to halt DB transfer work by the Financial Conduct Authority due to advice given to BSPS members.
West Wales Financial Services was also trading as IWA Financial Solutions and Mike Powell Mortgages.
Wolverhampton-based Fortuna Wealth was previously known as Fidelis Wealth Management Ltd and AWG Financial Ltd.
A.W.Dallas Financial Services was forced into liquidation in August after receiving 35 Financial Ombudsman Service (FOS) complaints in relation to BSPS pension transfer advice.
According to accountancy firm Menzies, which was instructed to place the firm into creditors’ voluntary liquidation earlier this month, the liability on the complaints could exceed hundred of thousands of pounds.
Menzies said the FOS complaints were received about advice provided to clients between August 2017 and February 2018 and constituted nearly a quarter of the firm’s client book.
In 2017, many British Steel workers were advised to transfer out of their defined benefit pension into a defined contribution pension, typically a Personal Pension Plan or a Self-Invested Personal Pension (SIPP).
It was one of three choices available to BSPS members. The others were the new scheme (BSPS2) and Pension Protection Fund (PPF).
The British Steel Pension Scheme was restructured in 2018.
When British Steel decided to encourage workers to consider moving their pension a number of advice firms moved in but poor advice was widespread and the scandal attracted national media attention with a number of Financial Planners helping victims on a pro bono basis and leading MPs getting involved.
The FSCS found that the returns needed by the former BSPS members’ new pensions were “unrealistic” to match the benefits offered by the BSPS2 or the PPF and the customers would have been better off if they had not transferred to a private plan.
The FSCS added that even if those that transferred have not lost money - the terms, exclusions and complexities involved in a DB transfer may not have been adequately explained.
By transferring to a private pension arrangement, members would also have lost the benefits already built up in the BSPS.
From Financial Planning Jobs. For more click on any job.
This is a selection of jobs from our new Financial Planning Jobs site - for more job vacancies click on any job or the link below.