A redress scheme for members of the British Steel Pension Scheme (BSPS) could be set to cost “billions”, Bovill has said, estimating that the financial advice industry alone stands to face costs of more than £300m.

As reported by our sister title, Pensions Age, the consultancy suggested that given this is “only a slice” of the volume of transfers undertaken across the industry, it has “no doubt” that the total cost will reach billions.

The comments were made in light of recent plans from the Financial Conduct Authority (FCA) to consult on a potential redress scheme , with firms in scope of the potential scheme sent a Dear CEO letter urging them to maintain adequate financial resources.

The regulator has also since stopped one former BSPS transfer adviser, AJH Financial Services, from disposing of assets, emphasising that it will take action to prevent firms from disposing of assets that are required to pay member redress.

Bovill consultant, Simon Goryl, highlighted the FCA's Dear CEO letter, along with the number of section 166 reviews in play across the industry, as demonstration that defined benefit (DB) transfer remediation is not going away any time soon.

“The letter heavily emphasised the regulator’s concern that firms will try to avoid paying through insolvency. This concern was then reemphasised by the recent guidance on managing liabilities," he stated.

“It would be prudent for firms to proactively investigate schemes with similar characteristics to BSPS within their book and perform some risk analysis to get ahead of the regulatory curve.

"Given the costs to carry this out, it wouldn’t be surprising if the FCA introduces further measures to push firms to address the issue.”

Indeed, Goryl emphasised that whilst the BSPS has been in the media limelight for some time now, this scheme is “likely to be only the tip of the iceberg when it comes to unsuitable DB transfer advice which requires consumer compensation”.

“We believe there are more pension schemes with similar characteristics from large institutions and employers, who have not yet received the same regulatory scrutiny,” he continued.

“Financial advisers and firms should be aware that once the BSPS consultation concludes, the regulator is likely to turn their attention to the advice given on other similar schemes.”

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