Nikhil Rathi, chief executive of the Financial Conduct Authority, is to face questioning from MPs as part of the Public Accounts Committee’s inquiry into the British Steel Pension Scheme transfer scandal.

MPs started their investigation following the publication of a damning report into the scandal by the National Audit Office (NAO) last week.

The NAO report concluded that 79% of the advice given to BSPS members by financial advisers was “unsuitable” or “unclear.” 

A raft of financial advice businesses that gave poor advice to BSPS members looking to transfer their pension out of the BSPS scheme have now collapsed.

Compensation costs have yet to finalised but the NAO estimates that 263 BSPS members have lost £18m of redress to date with some individual losses near £500,000.

Mr Rathi will be joined in front of MPs by the chief executives of the Financial Ombudsman Service and Financial Services Compensation Scheme.

The Committee will question them on the activities the FCA, “has undertaken to regulate financial advice in the BSPS case, its plans for supporting steelworkers who may be entitled to redress, and the extent to which compensation is being delivered.”

A date for their questioning has yet to be set.

The Committee has requested that anyone affected by the scandal submit evidence by Wednesday 20 April.

The FCA has so far issued £1.3m of fines and has 30 more enforcement investigations ongoing.

It has also changed its approach to regulating the pensions advice market in response to the BSPS case. From 2018 it began collecting more data from financial advisers and has changed the way it engages with regulatory partners, such as developing a joint protocol to enable early intervention in DB transfer cases and banning charges where advisers are paid only if a transfer proceeds.

The FCA is yet to decide whether to implement a consumer redress scheme for BSPS members, in which all firms involved would have to review their advice and potentially offer compensation. The FCA must gather evidence to meet legal tests before it can implement this scheme.

The regulator started assessing the suitability of a consumer redress scheme in April 2021 and expects to launch a consultation on this by the end of March.

A total of 263 pension scheme members have lost £18 million of redress so far because financial advisers have gone into liquidation and there are limits to the compensation that can be provided, according to the NAO report. Some 22% of complaints made to the Financial Ombudsman Service (the Financial Ombudsman) have been passed to the Financial Services Compensation Scheme (FSCS) due to firms being unable to pay compensation.

The average loss for BSPS claims resolved by FSCS is £82,600, with individual losses ranging from £0 to £489,000. The FSCS’s compensation limit for advice firms that failed after April 2019 is £85,000.