There are worrying reports coming from former BSPS members of a surge in offers from IFAs to compensate them for poor transfer advice. These offers are often as a result of claims made in 2021 or even earlier and are, relative to compensation claims paid prior to the recent rise in inflation and interest rates, very low indeed.
Those representing the steelworkers, principally Al Rush but also lawyers Clark Wilmot have written to the FCA , warning them that IFAs are using a spike in gilt yields which have doubled discount rates, to calculate redress on an artificially low basis.
Rather than paying the redress under the conditions at the time of the claim, some advisers have delayed compensation till a time when the market has moved against the steelworker and in the advisor’s favor. The worry is that where savvy IFAs lead, others will follow – FSCS included.
Once again, the complete shambles that has characterised the £3bn exodus of money from a once great pension scheme , is playing against the steelworkers. No doubt there are some powerful forces at work here, not least the PI insurers (still on the hook for much of the redress) but also those trying to manage the books at FSCS, who are the longstop insurer for claimants whose financial adviser has packed it in or been closed down.
What needs to be done.
It is highly unlikely that any of the authorities supposedly in charge of organising the redress scheme, will intervene immediately but they should.
It should be made clear to IFAs that settling claims should be at valuations at the time of the claim and not at a time of the IFA’s choosing. Delays in paying claims can only be justified with good reason and claimants offered compensation at today’s calculations should have a right to have these recalculated based on discount rates prevailing at the time the claim was received.
Rules for the redress scheme
In my response to the FCA’s redress scheme, I’ve made it clear that IFAs should not have control of the timing of the calculation of “valuations”, but that they need to value compensation at the time the claim was or is received. I am arguing this in my response to the FCA consultation CP22/15: Calculating redress for non-compliant pension transfer advice.
Right now , steelworkers are divided between those who have been fully compensated because their valuation was on a full and fair basis, those who have been partially compensated, because they have fallen foul of arcane rules at FSCS relating to ongoing adviser fees and those who are now being unfairly compensated as IFAs seize their window of opportunity to walk away from redress at a bargain price.
Is it any wonder that they talk of a “compensation lottery”?