The FCA has fined Pembrokeshire Mortgage Centre Limited (PMC) £2,354,331 for unsuitable advice to consumers to transfer out of the British Steel Pension Scheme (BSPS) and other defined benefit (DB) pension schemes.
The FCA’s view is that most people should keep the guaranteed income provided by a DB pension.
PMC advised 420 consumers, nearly two-thirds of whom were BSPS members, on whether to transfer out of their DB scheme – 93% were advised to transfer, and as a resulting PMC earned over £2m in transfer and ongoing advice fees.
Mark Steward, executive director of enforcement and market oversight, said: “Pembrokeshire Mortgage Centre advised hundreds of consumers to give up valuable defined benefit pensions without any adequate justification or rationale, using generic, templated advice not tailored to the specific circumstances of their customers while earning fees in doing so.
“The quality of advice seen here was woeful.”
Many of the people advised were in a vulnerable position due to the uncertainty surrounding the future of BSPS and the short timescale they had to make a decision.
However, the FCA said they did not receive the quality of advice they needed to make an informed decision.
The regulator said they needed clear, objective and expert advice. Instead, PMC gave unsuitable advice in 60% of cases, even higher than BSPS as a whole.
The failings included the provision of generic suitability reports that were not tailored to the circumstances of individual consumers and contained contradictory, misleading and confusing statements.
The FCA said PMC also failed to have adequate resources to deal with the increase in cases caused by BSPS, further impacting the quality of advice provided.
Many consumers, according to the regulator, were advised to transfer out even though they were relying on the guaranteed income to fund their retirement and could not afford to bear the risk of transferring out.
This included those who needed the money to provide for dependents needing long-term care.
Steward added: “The failings were particularly egregious in the context of the British Steel Pension Scheme, where customers were in an unusually vulnerable position.
“The FCA’s investigation into the involvement of others in these matters remains ongoing.
“Any consumers who were advised to transfer should contact the Financial Services Compensation Scheme to see if they are owed redress.”
PMC is currently in liquidation.
The FCA will give preference to creditors (some of whom may be consumers), ahead of its financial penalty, to maximise funds available for redress.
The FCA continues to progress c.30 ongoing enforcement investigations into firms and individuals relating wholly or partly to BSPS advice, all of which are at a very advanced stage, and some are in litigation.
