The British Steel Pension Scheme redress scheme

The British Steel Pension Scheme redress scheme is an FCA consumer redress scheme for people who were advised to transfer out of the British Steel Pension Scheme (BSPS) between 26 May 2016 and 29 March 2018¹. If the advice was unsuitable, the firm that gave it must review what happened and pay redress that aims to put the person back where they would have been had they stayed in the scheme.

The scheme matters because BSPS was unusually complicated. It was a complex defined benefit pension scheme with many different segments, or levels, of benefits, which made it hard for anyone to compare it fairly against a personal pension¹. Thousands of members transferred out on advice, and the Financial Ombudsman Service now handles complaints about those transfers².

Redress is not a fixed payout. The Financial Ombudsman Service says it is calculated by comparing the value of the benefits you would have had if you had stayed in the British Steel scheme against those you have now in your personal pension². This page explains who the scheme covers, the conditions attached to it, how the calculation works, and what happens when the adviser has since gone out of business.

What the scheme is and what it offers

A consumer redress scheme is a way for a regulator to require firms across a whole market to review past sales and pay compensation to everyone affected, rather than leaving each customer to complain individually. The Financial Ombudsman Service describes the legal basis plainly: under section 404B(1) of FSMA, it can decide a complaint only by reference to the outcome that should have been reached under the scheme⁴. In other words, once a scheme exists, the ombudsman does not invent its own remedy; it applies the scheme's remedy.

The government has been reviewing how the Financial Ombudsman Service works, including the approach to establishing a consumer redress scheme under section 404(1) of FSMA⁵. That review concerns the machinery of how schemes are set up, not the substance of the BSPS scheme itself.

For a BSPS member, the practical effect is that the firm which gave the transfer advice must carry out a review and, where the advice was unsuitable, calculate and pay redress. The scheme is not a general compensation fund and it is not a payout for anyone who simply regrets transferring. It is tied to the advice given in a specific window, and it is the adviser's responsibility to put things right.

Who the scheme applies to

The scheme applies to people who were advised to transfer out of the BSPS between 26 May 2016 and 29 March 2018¹. The Financial Ombudsman Service is equally specific: only advice given between 26 May 2016 and 29 March 2018 is covered by the scheme².

That date range is the single most important test. If a transfer was advised before 26 May 2016 or after 29 March 2018, the scheme does not apply, even if the person believes the advice was poor. They may still be able to complain about the advice through the normal complaints route, but the scheme's automatic review does not reach them.

Two other points follow from the scheme's design:

• It is about the advice, not the transfer itself. A member who transferred without advice is not within its scope.
• It is about transfers out of BSPS specifically, not transfers into it or general pension switching.

Anyone unsure whether their transfer falls inside the window can check the dates on their transfer paperwork and their advice records. The Financial Ombudsman Service publishes guidance for consumers on the British Steel Pension Scheme².

Conditions and exceptions

The scheme has an opt-out. You can let the business know you want to opt out of the redress scheme if you do not want them to review the advice you received². Opting out is a real choice with real consequences: it stops the firm carrying out the scheme review of that advice. It is not a step to take without understanding what is being given up.

There is also a boundary around what compensation schemes cover at all. The Financial Services Compensation Scheme states that its protection does not include defined benefit pension schemes themselves, which are protected by the Pension Protection Fund³. That distinction matters here. The BSPS was a defined benefit scheme, so the scheme itself sits with the Pension Protection Fund, while claims about the transfer advice sit with the adviser and, if the adviser fails, potentially with the FSCS.

The FSCS is the UK's statutory compensation scheme⁶, and its rules are set out in legislation as the Financial Services Compensation Scheme⁷. It covers seven different types of business: deposits, insurance policies, insurance broking, investment business, mortgage (home finance) advice or broking, debt management, and funeral plans⁸. Pension transfer advice falls within the investment business and advice categories rather than being a separate pot.

How the redress is worked out

The Financial Ombudsman Service sets out the method: redress is calculated by comparing the value of the benefits you would have had if you had stayed in the British Steel scheme against those you have now in your personal pension². The comparison is the whole calculation. It is not a flat sum, a percentage of the transfer value, or a refund of fees.

That approach means the outcome depends on the individual. Two members who transferred the same amount on the same day could receive different redress, because what they gave up in BSPS benefits and what they hold now will differ. The aim is to close the gap between the two positions.

For context on how redress calculations work in other mis-selling schemes, the Financial Ombudsman Service has published its approach to PPI. For regular-premium PPI policies, the remedy is to refund to the consumer all the premiums they paid to the PPI policy and pay the consumer interest at 8% per year simple⁹. For single-premium PPI attached to a loan, the approach is a restructuring of the loan (if it is still in place) so that the amount the consumer owes and the monthly repayments are corrected, plus a calculation of how much more the consumer has paid each month, with interest added to each overpayment¹⁰. Those are different schemes with different remedies, but they show the pattern: the remedy is designed to reverse the loss the mis-selling caused, not to pay a penalty.

What happens if the adviser has failed

Some of the firms that gave BSPS transfer advice have since stopped trading or failed. When that happens, the claim can move to the Financial Services Compensation Scheme, which is the UK's statutory compensation scheme⁶ and is funded by the financial services industry and is free to use⁸.

The FSCS covers firms that have been authorised by the Financial Conduct Authority or the Prudential Regulation Authority to do business in the UK⁸. For deposits, it protects up to £120,000 per person or company, per authorised firm⁸, and in most cases for deposits it aims to pay compensation within seven days of a bank, building society or credit union failing⁸. Those deposit limits are the ones most people recognise, but they are not the limit that applies to investment claims, and the FSCS publishes separate limits for each type of business.

The FSCS also explains who is involved in a claim and how the process runs⁶. Where a claim relates to a defined benefit pension transfer, the FSCS has published specific guidance on that process³.

Where to get help and how to complain

Complaints about BSPS transfer advice go first to the firm that gave the advice. If the firm does not resolve the complaint, the Financial Ombudsman Service can look at it, and it publishes consumer guidance on the British Steel Pension Scheme². The ombudsman service is free to consumers, and there is no need to pay a claims management company to bring a complaint about a pension transfer.

The FSCS can be contacted on 0800 678 1100 or at communication@fscs.org.uk¹¹. Its service is free to use⁸.

For anyone who wants to understand the wider picture before acting, the Financial Ombudsman Service has set out how it is modernising the redress system⁴, and the government has consulted on the future of the ombudsman service⁵. Both are about how complaints and redress are handled generally, not about individual BSPS cases.

If a firm has failed and the FSCS is involved, the FSCS explains who is involved in the claims process⁶ and how defined benefit pension transfer claims are handled³. MoneyHelper offers free, impartial guidance on pensions for anyone who wants to understand their options before deciding what to do.