The Financial Conduct Authority (FCA) has clamped down on Weymouth-based KBFS Financial Limited after they failed to pay compensation to former British Steel Pension Scheme members.
KBFS Financial Limited is an independent financial adviser firm based in Dorset. As of 23rd October 2023, they are no longer allowed to carry out regulated financial activities or sell or transfer their assets. City Watchdog, the Financial Conduct Authority (FCA) issued a First Supervisory Notice after the firm failed to pay redress to 5 clients who complained to the Financial Ombudsman Service (FOS) about unsuitable pension transfer advice.
FOS is the Government-backed, independent body responsible for settling disputes between financial institutions and their customers. In this case, the 5 individuals had all been advised by KBFS Financial to transfer out of their British Steel Pension Scheme into a Self-Invested Personal Pension (SIPP). This advice turned out to be unsound and the claimants were awarded compensation.
KBFS Financial failed to correspond with the clients about the money due to them, they never paid out any compensation, and they did not file the proper financial and regulatory documents with the FCA. A representative of KBFS Financial also applied to Companies House for the dissolution of the firm and for it to be struck off the Register of Companies.
The restrictions imposed are the result of financial advice given by the firm between 2015 and 2019.
Defined Benefit Pension Transfer Scandal
+ −While SIPPs are suitable for many investors, transferring from a final salary or defined benefit pension scheme is rarely advised. This is because the benefits offered by such schemes usually outweigh what can be achieved by investing in a SIPP. Transferring a pension also incurs fees, which means the new scheme would have to achieve even higher returns to cover these.
Many people who worked in public sector or nationalised industries have been persuaded to transfer out of their final salary pension scheme and, as a result of negligent financial advice, have invested in high-risk or unsuitable funds as part of their new Self Invested Personal Pension, and lost out financially.
The most highly publicised pension scandal relates to former British Steel workers, with the Government’s Public Accounts Committee reporting on the cost to pension holders and the FCA’s failure to oversee independent advice firms since pension freedoms were introduced in 2015. The Financial Times has reported that:
- 7700 former steelworkers were affected
- £2.8 billion was transferred out of the scheme
- 53% of transfer recommendations have been found to be unsuitable
- The average cost of compensating each person affected has been estimated at £45,000
- The FCA’s compensation scheme relates to advice given between 26th May 2016 and 29th March 2018
Defined Benefit Pension Transfer Compensation
+ −Whilst these transfers were made many years ago, it is still possible to claim compensation if you received unsuitable DB transfer advice. Even if you are the widow(er) of someone who transferred their pension, or if the Independent Financial Adviser (IFA) has gone out of business, has been taken over or changed its name, it is still worth finding out if a claim is possible.
Sarah Spruce, who heads up the Pensions Compensation team at TLW Solicitors, says:
“Even though the British Steel Pensions scandal has been in the news for years, there are still independent financial advice firms going out of business on a regular basis. If they are unable to pay compensation to their clients, they often have no option but to declare the firm illiquid, enter into administration and close their doors.
Once that happens, it is possible to claim compensation from the Financial Services Compensation Scheme (FSCS), a lifeboat scheme which can award up to £85,000 in compensation.
I would urge anyone who transferred out of a defined benefit pension scheme into a SIPP – and lost out financially as a result – to get in touch with our team.”
TLW Solicitors can help
+ −If you are concerned that you or a loved one were not given the right advice about leaving a final salary or defined benefit pension, please call us on 0800 169 5925 or complete one of the forms below. Our team will contact you for an initial, no-obligation consultation.
It is important to get advice as soon as possible, as strict time limits can apply.
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