FCA censures Lighthouse over unsuitable DB transfer advice

The FCA has censured Lighthouse Advisory Services for unsuitable advice given to people looking to transfer out of defined benefit pension schemes, including to members of the British Steel Pension Scheme (BSPS).

Between April 2015 and April 2019, Lighthouse advised 1,567 customers, 262 of whom were members of the BSPS.

Quilter acquired Lighthouse in June 2019, after the unsuitable advice. Quilter has however taken responsibility for the unsuitable advice provided before its purchase of Lighthouse and has proactively carried out a redress exercise.

By 30th April 2023, Quilter had paid approximately £23.17 million in redress to put affected Lighthouse customers back in the financial position they would have been in were it not been for Lighthouse’s unsuitable advice. A further £0.44 million has been offered to affected customers. This is far in excess of the fees Lighthouse received for the unsuitable advice.

Lighthouse had two advisers partially based on site at the British Steel works in Scunthorpe. Many of those Lighthouse advised were relying on their BSPS pension as their main source of retirement income and were in a vulnerable position due to uncertainty around the scheme.

The FCA's investigation found that Lighthouse’s advisers did not challenge BSPS members’ reasons for transferring or properly consider alternatives to meet their retirement objectives. In some cases, they failed to provide evidence as to why a transfer would be in members’ best interests. As a result of these failures 53% of advice provided to BSPS members from April 2015 to April 2019 was unsuitable – higher than industry average unsuitable BSPS advice levels (46%).

Similar failings in the advice process were found for other, non-BSPS customers, with 28% of that advice found to be unsuitable.

Since Quilter acquired Lighthouse, Quilter has replaced Lighthouse’s senior management team and its internal processes in relation to defined benefit transfer advice.

Therese Chambers, executive director of enforcement and market oversight at the FCA, said: "Many consumers were wrongly advised by Lighthouse to transfer out of their valuable guaranteed pensions.

"Given the vulnerable position of consumers transferring out the British Steel Pension Scheme, the firm should have taken real care in providing advice – it failed to do so.

"Quilter deserves full credit for taking responsibility for unsuitable advice given before they bought Lighthouse and for the proactive way in which they’ve worked with the FCA to put it right."