Unsolicited Fees and Redress Reviews from
David Stock & Co Lead to FCA Intervention

2015: Pension Freedoms were introduced, allowing investors to shop around for other investments and take their pension income in a variety of ways.

2017: The British Steel Pension Scheme (BSPS) was restructured after Tata Steel UK experienced financial difficulty. A letter was sent to all pension holders, offering three choices: remain with the original scheme and likely receive a reduced pension from the Pension Protection Fund, move to a new scheme (BSPS2) sponsored by Tata Steel UK which would provide lower future increases, or choose neither and transfer out of the scheme entirely. This was known as the ‘time to choose’ exercise, and 7,800 of the 130,000 individuals affected chose to transfer out entirely.

2018: The government’s Work and Pensions Committee received evidence of BSPS members receiving unsuitable financial advice and published a report. City watchdog, the Financial Conduct Authority (FCA), believes nearly half of all steelworkers who transferred out of the BSPS in 2017 and 2018 were given poor financial advice.

2019: The Pensions Regulator conducts an independent review of the BSPS restructuring and ‘time to choose’ exercises, criticising communication with members and making a series of recommendations.

April 2022: David Stock & Co is unable to demonstrate sufficient resources to meet potential consumer claims and is banned from disposing of assets without permission from the FCA. Many other firms involved in the BSPS scandal are similarly restricted or go out of business.

July 2022: The FCA is criticised in a report published by the Public Accounts Committee, which accused it of failing to protect BSPS members from “unscrupulous financial advisers.”

March 2023: The FCA’s deadline for firms to write to former members of the BSPS detailing a new redress scheme and explaining that, if eligible, they will receive a review of their pensions transfer advice.

17 March 2023: The FCA imposes requirements on David Stock & Co via a First Supervisory Notice. The company was found to have made unsolicited offers of £50 to almost half of its steelworker clients (50 out of 112). These were people who had been BSPS members and had not yet complained about being given unsuitable advice. The use of third-party redress calculators has been stopped, and the FCA requirement ensures that all David Stock & Co clients will be treated equally and receive the redress they are entitled to, regardless of whether or not they accepted the £50 offer.

Today: The government backed lifeboat scheme protecting customers of failed financial firms, the Financial Services Compensation Scheme (FSCS), details what steelworkers should do in relation to seeking compensation, including:

• Which organisation to talk to
• What to do if an advice firm went out of business before 28th February 2023
• What to do if an advice firm went out of business after 28th February 2023
• Frequently asked questions

Mr H had been a British Steel employee for 18 years and a member of their pension scheme. When he received his ‘time to choose’ letter in 2017, his pension pot was valued at over £225k. He approached David Stock & Co for advice, and in January 2018, they sent him an ‘initial report’.

The report outlined general observations about other British Steel pension scheme members’ views on the options presented in the ‘time to choose’ letter:

• to stay in the existing scheme and move with it to the Pension Protection Fund
• to transfer to version 2 of the British Steel pension scheme
• to transfer to a private pension arrangement

Mr H was assumed to be a ‘moderate or balanced’ investor and David Stock & Co could recommend a pension for him to transfer to.

A meeting was arranged, during which a more detailed fact-find was carried out. It was established that Mr H was, in fact, a ‘very cautious to cautious’ investor. Mr H’s pension was transferred to an investment fund preferred by David Stock & Co and managed by a Discretionary Fund Manager of their choice.

In February 2023, David Stock & Co wrote to Mr H out of the blue, saying it wanted to make him an offer, based on their own calculations, to resolve any issues or claims related to the original financial advice he had received. The company did not admit that the advice it provided was unsuitable for Mr H’s needs. Its calculation indicated Mr H hadn’t suffered any financial loss and offered £50 to settle his claim.

Mr H asked the Financial Ombudsman Service (FOS) to investigate the matter. FOS examines complaints between financial institutions and their customers. The FOS investigator decided that David Stock & Co’s advice was not in Mr H’s best interests. They recommended using the Financial Conduct Authority’s redress calculator to check if Mr H had suffered any financial loss. After carrying out the new calculation, it was still deemed that Mr H hadn’t suffered any financial loss, but he should still have the £50 as compensation for his trouble.

An Ombudsman then reviewed Mr H’s case to conclude matters. They agreed that Mr H had not been given suitable financial advice, noting specifically that:

• David Stock & Co’s assessments were based on an inaccurate attitude to risk (moderate)
• Mr H was unlikely to consistently achieve the level of growth quoted, based on his true attitude to risk (very low to low)
• Mr H was 46 at the time of the advice, and his circumstances and retirement aims could have changed in the following years
• Mr H was paying for financial advice and was unlikely to have gone against the recommendations made to him
• No further compensation was due to Mr H, as the redress calculations were correct

The Financial Conduct Authority reported on more than a dozen other companies that also tried to exclude former BSPS members from the redress scheme. It believes these were deliberate attempts that would have resulted in steelworkers receiving less money than they might be entitled to under the redress scheme. In May 2023, the FCA wrote to all firms outlining its expectations in relation to redress calculations and reinforcing its regulatory powers to prevent harm to consumers.

Sarah Spruce, Legal Director and head of the Professional Negligence team at TLW Solicitors, says:

“The FCA was quick to step in and put a stop to firms trying to make unsolicited settlement offers. Steelworkers have had to deal with pension uncertainty for a number of years and might have been tempted to have the issue resolved more quickly – however, this would have been to their detriment. The aim of the FCA’s redress scheme is to get people back to the financial position they would have been in at retirement had they not transferred out of the BSPS, so it is better to see that process through to the end.”