British Steel redress hit by falling annuity prices

However, the value of payments is lower than initially estimated due to market movements. Individual firms and the Financial Services Compensation Scheme have collectively paid out £8.7m, compared to an initial estimate of £50m.

The FCA said the difference reflected the fall in the cost of annuities. Redress calculations were based on the money that an individual required to secure an annuity income “similar” to that promised under the original British Steel Pension Scheme (BSPS).

In addition, more than 1,700 people have been paid nothing despite receiving unsuitable advice, after regulators ruled that they had not lost out financially.

The regulator stated: “If a former BSPS member has more in their defined contribution pot than the value of the benefits they would have had if they had stayed in the BSPS, then they won’t be offered any money following a redress calculation. This is because even though they received unsuitable advice, they haven't lost out as a result.

“We understand former BSPS members may be disappointed to receive no money or less than expected. The purpose of redress calculations is to ensure that, as far as possible, former members are put back in the financial position they would have been in had they remained in the BSPS.”

Brian Nimmo, head of redress at Broadstone, said consumer disappointment in compensation levels risked undermining the redress scheme.

“Many ex-British Steel Pension Scheme members will have entered the redress scheme with expectations of receiving life changing amounts of compensation,” he said. “It is unsurprising that they will have been left bitterly disappointed if they received nothing at all.

“There is a glaring disparity of outcomes depending on when each individual was assessed for loss with those waiting for the FCA’s redress scheme typically receiving far less compensation than those who received compensation earlier.”

Before the redress scheme was introduced last year, regulators had secured £97.4m in payments to at least 1,510 affected consumers. This equated to more than £60,000 each on average.

The FCA’s redress scheme averaged less than £25,000 per person, with 360 people receiving payments.

“As early as July 2022, it was clear that the changing market conditions meant that redress levels were falling drastically,” said Broadstone’s Nimmo.

“It highlights the importance of keeping consumers informed and up to date with the latest developments as expectations could have been better managed throughout this process.

“That so many consumers will be potentially disappointed with the outcome risks undermining the laudable aims the redress scheme set out to achieve.”

Following years of regulatory work and interventions, the FCA said it had banned 15 individuals from working in financial services or from holding specific roles due to their actions relating to advice given to BSPS members.

Regulators are still accepting new claims, meaning the total compensation cost could rise.

Further reading

BSPS redress scheme comes into effect (28 February 2023)

New British Steel scheme secures third buy-in (16 January 2023)