We have today published a consultation proposing updates to how redress is calculated for unsuitable defined benefit transfers advice, following a periodic review.
Redress aims to put consumers back in the position they would have been in had they remained in their DB scheme.
Our most recent review has found that, overall, the current methodology remains appropriate. However, we are proposing some updates to help ensure the guidance continues to reflect actuarial best practice and is responsive to consumers’ individual circumstances. It also aims as far as possible to reduce the impact of market volatility on calculations.
We have strengthened our view that redress should be paid into the consumer’s personal pension where possible to ensure it is used to make up pension shortfalls. Our consultation explores how this could work in practice.
Any updates will apply to all cases that have not been settled when the changes come into effect. In the meantime, we expect firms to continue to calculate and offer redress in line with existing requirements. Until any updates take effect, firms will need to explain to their customers how they have arrived at a figure, and how this puts them back in the position they would have been in, if they had not received unsuitable advice. Firms will also need to explain that customers have the option of waiting for the outcome of this consultation to settle their case.
However, firms and consumers can continue to be confident that the existing guidance allows redress to be calculated effectively.
BSPS consumer redress scheme
We are proposing to set up a redress scheme for people who transferred out of the British Steel Pension Scheme. This should see advice firms pay over £70 million of compensation to British Steel workers. That’s in addition to over £70 million which has already been paid out.
The consultation also sets out our proposals for calculating redress for our proposed consumer redress scheme for former British Steel Pension Scheme (BSPS) members. Calculations under the scheme will generally follow the same methodology as all DB transfer cases, but we have adapted certain elements to reflect the particular circumstances of the BSPS scheme.
We are also setting out our proposals for a redress calculator if we decide to set up a scheme. This will help make calculations more consistent, ensuring former BSPS members receive fair and quick redress, and reduce the overall cost of calculations.
The consultation closes on 20 September 2022.