Mr Bailey is now governor of the Bank of England.

He defended the regulator not taking immediate action to ban contingent charging to the Public Accounts Committee yesterday as part of an inquiry into the British Steel Pension Scheme scandal.

Nick Smith MP asked Mr Bailey why the FCA did not act on a recommendation from the Work and Pensions Committee in January 2018 to ban contingent charging.

Mr Bailey said the regulator took its time to decide on its approach and that it was not obvious at the time.

He said: “The idea of charging everybody whether you transfer out or not, I think would have had quite an effect of killing the pension freedoms.”

He was in charge at the FCA between 2016 and 2020 when it was discovered thousands of steelworkers had been poorly advised to transfer out of British Steel’s defined benefit pension scheme.

Advisers who recommended members transfer their pension scheme were financially rewarded under contingent charging, with clients only paying for advice where they went ahead with a transfer.

Mr Bailey said the problem solved itself when workplace pensions were introduced and offered a “reasonable and sensible alternative to contingent charging”.

Mr Smith went on to criticise Mr Bailey and the FCA’s approach further by noting that the ban did not come into force for 15 months after it was proposed at a time when upto 60% of advice firms were using contingent charging for pension transfers.

The FCA ban came into effect from October 2020 after being proposed in July 2019.

Mr Bailey defended the FCA’s approach to the British Steel scandal.

He said: “Don’t think the FCA was sitting on information and not doing anything as that is not the case.

“Consumer protection is a constant challenge because the world evolves constantly. The case we are looking at is the most complex piece of advice anyone can take.

“As a regulator there are relative judgments, and you have to focus your resources. In my opinion the SIPP issue was even bigger. At the time. If we could have got the targeted warnings out much earlier, we would have.”

The Public Accounts Committee began its investigation into the British Steel scandal and plans to introduce a consumer redress scheme in April, when it opened its investigations by questioning the FCA and other regulatory bodies.

Current FCA chief executive Nikhil Rathi told the MPs at that time that the FCA is getting better at timely consumer interventions. 

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 or a SIPP.

The scandal has attracted national attention and criticism.

The FCA earlier this year said that it was looking at 343 advice firms involved in BSPS claims and was expecting to pay out over £70m in compensation.