FCA issues fines totaling £1m for pension advice and oversight failings

Latest episode in long-running scandal means 83% of pension transfer advice failed to comply with minimum required standards.

The disciplinary actions arising from faulty advice given to former British Steel Pension Scheme (BSPS) members continue, with Inspirational Financial Management Ltd (IFM), now in administration, fined £897,840 ($1,146,082) for advising customers to transfer out of their defined benefit (DB) pension schemes. The FCA found that 83% of all IFM’s advice failed to comply with its minimum required standards, and that customers risked financial loss due to that advice.

The company was found to have provided unsuitable pension transfer advice between June 8, 2015 and December 22, 2017, and to have failed to properly consider the customers’ best interests on whether to transfer out of their secure DB pensions or not.

IFM was operating a contingent charging model, in which it only collected fees if customers followed its advice to transfer out of their DB pension schemes. The FCA said that this approach risked the customers’ long-term financial health and interests.

Banned and fined

Arthur Cobill, an adviser at IFM, and William Hofstetter, one of its directors, were also banned and fined £120,000 ($153,246) and £40,00 ($51,082) respectively for faulty advice to customers. Both were banned from advising customers on pension transfers and pension opt outs, and Hofstetter was also banned from holding any senior management function at any regulated firm.

Of 307 IFM customers that were advised to transfer out of their DB pension scheme, 261 choose to do so. Cobill advised 245 of them, and 198 were BSPS members. In total, the BSPS members that Cobill advised had pension benefits worth totalling over £90m ($115m).  

“Pensions are the safety net people spend their lives building. For many customers, their DB pension was their most valuable asset, and it was their only retirement provision other than their state pension,” said Therese Chambers, the FCA’s Joint Executive Director of Enforcement & Market Oversight. “As experienced advisers, Mr Cobill and Mr Hofstetter, and IFM should have known better than to unravel this.”

British Steel Pension Scheme

In 2023, the FCA took enforcement actions against 14 firms and individuals in relation to the British Steel Pension Scheme, with sanctions totalling £5.4m ($6.8m); financial penalties of £3.9m ($4.9); and payments to the Financial Services Compensation Scheme of £1.5m ($1.9). The actions included: