DB pension transfer PII: the British Steel legacy and the 2026 market

~5 min read

Reviewed by Matthew Bartlett, Director · Last reviewed 2026-07-06

Defined benefit pension transfer advice generates the highest-severity claims in the UK IFA sector by some distance. The British Steel Pension Scheme (BSPS) transfer scandal of 2017-2018, and the FCA and FOS response to it, reshaped the professional indemnity landscape for any firm holding DB transfer permissions. Insurers repriced. Some withdrew from the segment altogether. Firms with a DB transfer back-book have had to rethink their exposure, their current cover, and — for some — the future viability of the transfer permission itself. This entry sets out what happened, why the market responded as it did, and where the DB transfer PII market sits in 2026.

The BSPS context

In 2017, changes to the British Steel Pension Scheme following Tata Steel's UK restructuring gave scheme members three options: stay in BSPS, transfer to the new BSPS2 scheme, or transfer out to a personal pension arrangement. Around 8,000 members transferred out, generating IFA advice fees estimated in aggregate at £30-40 million and pension transfer values totalling roughly £2.8 billion. The FCA's post-event review found that the majority of those transfers were unsuitable — the members would have been better off remaining in the DB scheme. A subsequent redress scheme launched in 2022 required advisers to review their BSPS transfer files and, where the advice failed FCA standards, offer redress to affected members.

The FCA response

The FCA rewrote COBS 19.1 to tighten the DB transfer suitability framework. The "starting position" that a DB transfer is unsuitable was made more explicit. The Transfer Value Analysis (TVA) was replaced with the Appropriate Pension Transfer Analysis (APTA). Contingent charging — advisers only charging for a transfer if the transfer proceeded — was banned in October 2020. Firms holding DB transfer permission were required to keep detailed records of the entire advice process and to provide comparators (the Personal Pension Illustration) alongside any transfer recommendation.

Alongside COBS 19 changes, the FCA opened its Skilled Person review process on individual firms, generated enforcement outcomes against specific advisers who had run high-volume BSPS transfer practices, and levied substantial fines. Several firms lost their DB transfer permission during this period, and some entered insolvency under the weight of redress liabilities.

The claim cohort

The claim cohort that flowed to FOS between 2019 and 2024 was material. Individual awards routinely reached the FOS limit (then £355,000, rising to £415,000, now £430,000). Firms handling 100 or 200 BSPS transfers faced aggregate FOS liabilities in the tens of millions. Where PII cover was insufficient — either due to aggregate limits, excesses, or specific DB transfer exclusions — the exposure fell on the firm itself, and in a number of cases on the Financial Services Compensation Scheme when the firm collapsed.

The PII market response

The IFA PII market for DB transfer permission responded in three ways. First, premium repricing — firms with material DB transfer history saw premium increases of 200-500% between 2018 and 2022. Second, appetite withdrawal — several established IFA PII insurers stopped writing DB transfer risks, reducing the pool. Third, wording tightening — insurers introduced specific DB transfer sub-limits, higher excesses on DB transfer claims, and explicit exclusions for advice given before the current version of COBS 19.

The consequence is a materially harder market for DB transfer firms than for advice firms without the permission. Some firms retained DB transfer permission for legacy client reasons but effectively wound down new DB transfer activity, allowing the claim exposure to age out over time.

Where the market sits in 2026

By 2026 the market has stabilised, but at a level materially above pre-scandal norms. Firms without DB transfer permission and without a DB transfer back-book can secure competitive terms across a wider pool of insurers. Firms with active DB transfer permission face a smaller market with rates that reflect the ongoing claim tail. Firms with a legacy DB transfer book but no current activity typically face bounded pricing as the tail runs off — the six-year FOS window means that by 2026 the great majority of pre-2020 advice is time-barred from FOS referral, though "date of knowledge" arguments can extend individual cases.

The evolving pension transfer market

New DB transfer activity has fallen materially since the BSPS peak. FCA data shows a decline in transfer volume from around 34,000 transfers in 2017-18 to a fraction of that level by 2024-25. The combination of tighter COBS 19 rules, the ban on contingent charging, higher CETV (cash equivalent transfer value) figures caused by lower gilt yields, and firm-level reluctance to take on the exposure has reduced the flow. Where new transfers do happen, they are typically higher-value cases where the advice case is more clearly defensible.

Implications for IFAs looking at DB transfer permission

Firms considering applying for DB transfer permission should factor three things into the decision. First, the PII premium impact — DB transfer permission adds materially to premium, and the addition may not be recoverable through the fees earned on transfer cases. Second, the compliance overhead — COBS 19 documentation is substantial and requires either an internal specialist or an external compliance consultant. Third, the reputational and business-continuity risk — a firm that loses DB transfer permission through enforcement action typically loses more than the transfer segment; the FCA action affects the whole firm's authorised status.

Run-off implications

A firm ceasing an active DB transfer practice — whether by giving up the permission or winding down the practice altogether — should think carefully about run-off. The general six-year FOS window applies from the date of the advice, but "date of knowledge" arguments can extend that materially. A transfer completed in 2019 that turns out to have been unsuitable and produces client detriment crystallising in 2028 could still be within FOS jurisdiction on a knowledge argument. Extended run-off of 10 or more years is a serious conversation for any firm winding down a DB transfer book.

Worked example

Illustrative only. A five-adviser IFA firm with historical DB transfer permission, active 2015-2019. Around 60 transfers completed, mostly BSPS-adjacent. Firm gave up transfer permission in 2020 and has operated as investment-advice-only since. In 2026 the firm faces two live FOS complaints on 2018 transfers. PII cover is placed on a wording that treats the historical transfers as covered under the ongoing policy. Premium is materially above the market rate for a non-transfer firm reflecting the residual back-book. On a broker recommendation, the firm has costed a 15-year run-off scenario against the possibility of ceasing altogether — the run-off multiplier is significant but the exposure it covers is more so.