Nearly five years after the event, the former CEO of the FCA Andrew Bailey was called to the Public Accounts Committee to answer questions on the FCA’s unpreparedness for what is now known as the British Steel mis-selling scandal. You can watch his exchanges with the doughty Nick Smith MP on this link.
In 2017, the original inquiry by Frank Field for the Work and Pensions Committee had shown how unprepared the FCA were, Megan Butler attended a WPC meeting not knowing who it was that the FCA had stopped mis-selling. But as the notes of that meeting show, the FCA were putting out another regulator’s fires.
Watching Andrew Bailey’s grilling , it was hard to see why the finger was just being pointed at Bailey when the FCA were cleaning up somebody else’s mess.
Now Bailey is pointing to a poor regulatory framework that that he inherited; rushed policymaking, and rushed corporate restructurings for the BSPS pension scandal, should IFAs be picking up the full pension mis-selling bill for BSPS members?
— Josephine Cumbo (@JosephineCumbo) June 13, 2022
Noticeably absent from Bailey’s grilling was any mention of the Pensions Regulator who sanctioned the Regulatory Apportionment Agreement that led to the impossible choices offered steelworkers. The Pensions Regulator failed to oversee proper protection for members by the trustees who refused to sanction the resources I and others told them were needed to deal with the oncoming deluge of transfer requests.
Was the FCA up to it – was Andrew Bailey the right man to lead it?
During his appearance, Andrew Bailey claimed he inherited a regulator struggling to do its job because it touched the firms it regulated only once every 3 years. He claimed that rather than sitting on information , the FCA simply didn’t have the evidence to act quicker than it did.
This might be true, but it leaves unexplained why after the sacking of his predecessor Martin Wheatley in 2015, the FCA were still in a mess 2 years into his time.
He described his previous career at the PRA as ordered and process driven and painted a picture of the chaotic challenges he encountered from retail markets. He seemed to be saying he was in the wrong job. Becoming Governor of the Bank of England must have been welcome relief after years BSPS, the lengthy process of banning contingent charging and the grief he got from consumer groups. Now, rather than attending world economic summits , he found himself questioned by Nick Smith MP about Darren Reynolds and Active Wealth. It did seem a little surreal – but then so did Port Talbot in September 2017.
Running the FCA is a tough job and Andrew Bailey did not give the impression of being a man who enjoyed the challenge .
So what of the future?
Now, the other side of the National Audit Report on the debacle, the FCA is being held responsible for the redress working and it is finding that many of its sessions in Port Talbot and Scunthorpe are not packed out.
The FCA believes there are about 4,000 people it still needs to get to regarding BSPS and 75% have not complained. Bailey pointed out that steelworkers were split between those who were complaining about the advice given and those who even today, will not come forward with a complaint. As Al Rush consistently says, there are many steelworkers who prefer the money in their SIPPs than in BSPS. Here is the crux of the problem for the FCA’s redress scheme.
Technically, 46% of the transfers should not have gone ahead, but in practice many who could seek compensation, seem happy with their lot. To repeat a theme of this blog, the fault for the debacle was not just down to financial advisers, Time to Choose should not have happened.
The big lesson from BSPS is that decisions on pensions have consequences on members that need to be understood by both the FCA and TPR.. Lesley Titcomb , the then CEO of TPR, must accept the FCA were negligent in their duty to protect members and the failure to foresee a rush to transfer was more a failure of the Pensions Regulator than the FCA.
All the same, it was ludicrous that the FCA knew so little about what was going on over the summer of 2017 and that it had no local knowledge. The BBC, the FT, this blog and the social media of the British Steel members group, all pointed to a major financial incident. In the end , over £3bn exited a well run scheme into people’s SIPPs and hundreds of financial advisers are now unable to advise because of constraints upon them from their insurers and from the FCA.
There may have been structural problems with the FCA – as Andrew Bailey claimed, but that does not excuse the torpor of the FCA in the crucial months of choice. So while we may accept that Andrew Bailey was in the wrong job, we have to ask how he got there in the first place.