Consumer redress scheme for unsuitable advice to transfer out of the British Steel Pension Scheme – addendum to PS22/14 [pdf]

The Financial Conduct Authority, FCA, has published an addendum to its policy statement (PS22/14) specifying a new consumer redress scheme in connection with the provision of (inadequate) advice to transfer out of the „British Steel Pension Scheme“ between 2016 and 2018. The addendum simply corrects an error in Chapter 6, page 77 of the document pertaining to the cost-benefit analysis provided by the FCA for the implementation of the new Policy Statement. Instead of
„Extrapolating from the latest FSCS claims data (covering Q3 2022), in which average financial loss reduced from 22% to 16.5% of the pension transfer value, we have also reduced the estimated average redress from 16% of the transfer value to 12% (from approximately £60,000 to £45,000), to reflect changes to the economic environment. The redress calculation methodology is designed to respond to changes in the economy by using assumptions based on financial markets’ future expectations of economic factors. These assumptions are used to estimate the value of the DB benefits. In particular, the calculations are heavily influenced by long term gilt yields and long-term inflation expectations.“
it shall read:
„Extrapolating from the latest FSCS claims data (covering Q3 2022), in which average financial loss reduced from 22% to 16.5% of the pension transfer value, when we carried out sensitivity analysis on our estimates we modelled a reduction to the estimated average redress from 16% of the transfer value to 12% (from approximately £60,000 to £45,000), to reflect changes to the economic environment. However, the CBA uses firm-specific average transfer values rather than a market average, and continues to assume in its central scenario the same estimated average redress (16%) as in CP22/6. The redress calculation methodology is designed to respond to changes in the economy by using assumptions based on financial markets’ future expectations of economic factors. These assumptions are used to estimate the value of the DB benefits. In particular, the calculations are heavily influenced by long term gilt yields and long-term inflation expectations.“