Echelon Wealthcare principal Al Rush is considering the launch of a judicial review against the Financial Conduct Authority.

Hausfeld partner Ned Beale, who represents Rush, told Money Marketing that they do not think the FCA’s British Steel Pension Scheme (BSPS) redress scheme goes far enough.

Beale said there are two main aspects that worry them. The first one is that the redress scheme only applies going forwards. As a result, there is no route for steelworkers who have already received compensation to have that compensation reviewed and adjusted if necessary.

Rush added: “There are many who have had compensation, but it’s been low or incorrectly done.

“It’s the old premise, you leave no man behind. The first people who had the courage, dare I say it, to come forward when it was more difficult are the people who we think should not be overlooked.”

The other aspect is the basis on which the FCA has advised that compensation should be calculated.

Beale said: “What the FCA has done is endorsing a point in time calculation, which involves two projections.

“If you take a steelworker who is 45, will retire at 65 and has wrongly been advised to transfer out of the defined benefit scheme, then the FCA will give that steelworker X thousand pounds today. What will that X thousand pounds be worth in 20 years? What are the investment rates? And what will the annuity rates be in 20 years’ time?

“The FCA has said you should come up with a lump sum paid today based on those two forecasts.

“We believe that those forecasts won’t be accurate. It’s not possible to estimate what is a realistic discount rate or what the annuity rates will be in two decades time.”

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A spokesperson for the FCA said: “The aim of redress payments is to ensure those who transferred out of their pension following poor advice receive a retirement income similar to what they would have received from their original DB scheme.

“For most steelworkers, the best course will be to pay any redress into their defined contribution (DC) schemes. Our methodology works out how much money a consumer should have in their DC pension today so that when they retire they can buy an annuity that provides a guaranteed income similar to what they would have received from their DB scheme.

“It is, therefore, necessary for the methodology to make assumptions about future annuity prices and investment returns to estimate this amount.

“This is consistent with the approach a court would take to calculating damages in cases like this. The assumptions we require firms to use are based on robust, publicly available data from sources like the Bank of England.”

The regulator stressed that the alternative approach, which is to wait until the consumer has retired to calculate redress, is not practical.

The FCA spokesperson added: “This would depend on the firm continuing to trade until the consumer’s retirement date. As this could be many years in the future, it would not be possible to be certain about this.

“We did not include people who have already accepted compensation in the scheme as they have already received redress.

“Applying new rules to earlier cases which have been resolved would also be at odds with the general presumption that legislation (including regulators’ rules and guidance) does not apply retrospectively.”

In addition to a judicial review, Beale and Rush are considering two alternative options.

One is to become part of the judicial review initiated by the by British Steel Action Group as an interested party or intervener.

Beale said: “The judicial review rules provide that if there are parties who will be directly affected by the outcome of a judicial review, then they can apply to be interested parties.

“Many of the victims, who we represent, will be directly affected if the judicial review succeeds and there is no compensation scheme.”

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The other one is to continue the process of liaison that Rush and Beale have had with the FCA.

“We have had meetings with them and some of the things that we’ve wanted for this scheme have been put in the scheme,” Beale added.

Beale and Rush set themselves until the end of February as a deadline to move to the next step.

Beale said: “Our concerns about the unfairness are twofold.

“One is that it’s unfair going forwards. It just seems very unlikely that people will really be put back in a position that they would have been if they had been in a defined benefit scheme because of the uncertainty of forecasts.

“Secondly, it’s causing unfairness right now, because the FCA is endorsing this point in time calculation. Gilt yields are going up and down so much, you get very different calculations and therefore compensation payments just within weeks.

“That means steelworkers within a wide but close-knit group are getting dramatically different cash payments through totally arbitrary timing differences, whether it’s because somebody decided to put in the claim themselves a month early, or whether it’s because their IFA or the FOS processed it a little bit later. That is causing a lot of disquiet too.”