Find out how the redress calculations will be made, and what to do if you think any of the information used is wrong.
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How redress calculations will be made
We have produced a calculator that firms, or third parties acting on their behalf, must use to work out any redress you’re owed under the scheme. The Financial Services Compensation Scheme (FSCS) and the Financial Ombudsman Service also have access to our calculator.
This will help make sure that calculations are fair, quick and consistent.
We’ll be monitoring how firms implement the scheme to make sure that they’re using the calculator correctly.
If firms don’t meet our expectations, we’ll take appropriate action.
Changes in redress values
A key aim of our scheme is to make sure that if you received unsuitable advice to transfer out of the British Steel Pension Scheme (BSPS), you do not lose out as a result and you get the retirement you worked for.
To work out if you are owed money, firms must calculate how much you need in your defined contribution (DC) pot to match the pension you would have received had you not transferred out. Firms then compare that with the expected value of your current DC pot at retirement. The calculations are based on what financial markets expect to happen in the future.
Putting you back in the position you would have been in
We understand it can be disappointing to receive no, or less, money than you expected. But the scheme ensures that, as far as possible, you are put back in the financial position you would have been in had you remained in the BSPS. This is consistent with the approach a court would take to calculating damages in such cases.
Our redress calculation assumes that you will aim to get the same benefits you gave up, by buying an annuity. An annuity provides a guaranteed income for life.
Since we introduced the redress scheme, the expected cost of funding guaranteed retirement income through an annuity has fallen. For example, to achieve the same guaranteed retirement income as someone who received redress two years ago costs less. The amount needed to top up your DC pot to put you back in the position you would have been in, if you hadn’t received unsuitable advice, is also likely to be less.
If you have more in your DC pot than you would have got from staying in the BSPS, then you won’t receive any money. This is because, even though you received unsuitable advice, you haven't lost out.
Investing redress
If you do not invest your redress or invest it in a different way, you take a greater risk of not achieving the same level of retirement income that you gave up. For example, if you leave your redress payment in a current account, it might become worth less over time due to inflation.
Find out more about defined benefit pension redress calculations[1].
Redress limits
If your firm makes you an offer, there are no limits to the amount of money you may be paid.
But if your firm has gone out of business (or goes bust during the scheme), you can ask the FSCS[2] to review the advice you received. The FSCS can award compensation of up to £85,000 if your firm failed on or after 1 April 2019.
Your calculation report
To help you understand your offer, and how it was calculated, your firm will send you an offer letter and a summary calculation report. You can also ask for a more detailed calculation report.
The report shows the information about you that your firm used to calculate your offer. You should check that this information is correct, to make sure the firm is offering you the right amount of money.
You should check:
If you think any of the information used in your calculation is wrong, let the firm know as soon as possible.
Calculations are personal to each individual, and you shouldn’t try to compare how much redress you’re offered with others.
The schemes used in redress calculations
BSPS members who didn’t transfer out of the BSPS could choose to either:
- move their fund to the new BSPS scheme (BSPS2)
- remain in the old BSPS Scheme (OBSPS), which moved into the Pension Protection Fund (PPF)
Members in the PPF are now being moved to a fund with the Pension Insurance Corporation (PIC). It’s not possible to reinstate people who transferred out back into these schemes.
We expect firms to use the evidence on file to determine which scheme you would have joined. They should use this scheme in their calculations.
Where there is no evidence on file, BSPS2 should be used as the default scheme, on the basis that two-thirds of people chose to go into BSPS2 during the Time to Choose Period.
The scheme used in the calculation can make a big difference to the offer you get. If the scheme used gives you a lower redress payment, the calculation report should tell you how much more you would be owed if the firm had chosen the other scheme.
The PPF scheme may have been a better choice if:
- you had concrete plans to retire early
- you wanted or needed a large lump sum to start your retirement with
- and you could accept that your pension would be cut down by 10%
Other Losses
You also need to let your firm know about any other losses you think you may be owed money for. You can do this by completing the ‘Other Losses’ form that your firm will send you. These losses could include money you had to pay to get tax advice, any tax charges you had to pay or, if appropriate, compensation for any distress and inconvenience you have suffered. Awards for distress and inconvenience will, if eligible, vary depending on individual circumstances and will likely be modest.
What to do if you think your offer is wrong
If you think your offer hasn’t been calculated correctly, tell the firm that sent the payment offer as soon as possible.
If you are still unsure or need more help, you can contact the Financial Ombudsman by:
- phone: 0800 023 4567 / 0300 123 9123
- email: [email protected]
You can also contact our BSPS helpline by:
- phone: 0800 098 4100
- email: [email protected]
Or find other ways to contact us[3].
Changing your adviser
You may want to get a new adviser for any of the following reasons:
- you currently have no adviser
- you are in the scheme and you completed a form to cancel your advice arrangement if you are still with the adviser who gave you your transfer advice
- your current arrangement costs more than the allowance for ongoing advice charges covered in your redress payment (0.5% for redress calculations carried out after 1 April 2023) and your adviser won’t reduce their charges
In those circumstances, your offer will include an amount so you can take initial advice from a new adviser.
If your firm finds that you’re not owed any money, there’s enough money in your current pension pot to pay for a new adviser without you being worse off than if you’d stayed in the DB scheme.
Ask your firm to tell you the amount of initial advice allowance that’s included in your offer.
When looking for a new adviser, check that their advice charges, product charges and expected investment growth are no higher than the rates that were assumed when your redress was calculated. You can find the assumed rates in your redress offer.
MoneyHelper has more information to help you find a financial adviser[4].
If you’ve already accepted an offer
If you’ve accepted an offer in full and final settlement before 28 February 2023, you won’t be included in the scheme.
If you’ve accepted an offer following a decision from the Financial Ombudsman or FSCS, you won’t be included in the scheme and the offer that you received won’t be reassessed.
If you have any concerns about the offer that you accepted, you can contact the Financial Ombudsman or the FSCS.