In 1994 the industry regulator ordered a review of sales of personal pension policies (both regular-premium and transfer policies) taken out between 29 April 1988 and 30 June 1994. This is known as the Pensions Review.
The deadline set out in the formal Pensions Review was 31 March 2000 - so it is now too late for a consumer to ask for a Pensions Review. But a consumer who was not included in the Pensions Review can still bring a complaint to us - and we might be able to consider it.
The Pensions Review recognised three problem areas:
We see complaints where the consumer says they should have been advised to join an employer's pension scheme - but the adviser says:
When deciding these cases, we consider whether the adviser knew (or should reasonably have made further enquiries) about any occupational scheme that was available to the consumer - even if the consumer indicated that no such scheme was available, or that they were not eligible to join it.
We will look at the circumstances of each case. But in general, we think that advisers should have been aware of the existence of larger occupational schemes. We would usually expect an adviser to have recommended that a consumer join an occupational scheme where one was available.
In some cases, the adviser says it was documented that the consumer "may not stay long with this employer". Here, we would usually still think it appropriate for the adviser to have recommended joining the occupational scheme to avoid the consumer missing out on the valuable benefits it offered - for example, death benefits.
We have seen many complaints from employees who had planned to leave their employer - but eventually did not.
We assess loss as being the difference between the value of the benefits under the occupational scheme and those available in the personal pension - making allowance for differences in the levels of contributions paid and expenses.
Although the Pensions Review recommended reinstating a consumer into their occupational scheme if possible, there are now only a few schemes that offer reinstatement. Where it is not possible to reinstate the consumer, we generally say that the personal pension arrangement should be augmented.
Following recent changes in legislation, many personal pension providers will no longer accept augmentation redress payments. In these circumstances, redress may be paid in the form of a lump sum to the consumer, usually adjusted to allow for the consumer’s expected rate of income tax when taking benefits.
When a consumer transfers benefits from an occupational pension scheme to a personal pension arrangement, they sometimes feel that their likely or actual benefits are lower than they would have been if they had not transferred. As a result, they complain about the advice they received.
We look at a number of factors in these cases, including:
As part of the Pensions Review, the regulator produced a table of maximum growth rates (page 23) which it would have been reasonable for advisers to rely on when considering whether a consumer should transfer. If the critical yield was over the maximum figure then the advice should have been not to transfer.
But a required critical yield below the maximum does not necessarily mean that a transfer would have been appropriate. The maximum rates changed over time and lasted for varying periods. A key factor in deciding whether the advice to transfer was appropriate is the level of the critical yield required to match the deferred benefits being given up.
If we decide the adviser gave unsuitable advice - and that the consumer would not have transferred their pension if they had received suitable advice - we will usually uphold the complaint.
For complaints we uphold that fall outside the Pensions Review, redress should be calculated based on the latest set of assumptions and at the latest review date. The assumptions and review date can be found in the section of our website for redress in pension mis-sale cases that fall outside the Pensions Review.
We receive complaints from consumers who say that they did not receive the Pensions Review mailings - and now realise they may have been badly advised in the past.
In these cases we may have to consider whether the complaint is "time barred". We are only allowed to investigate cases where our rules allow it. These are set out in the Financial Services Authority's Handbook - in the section called Dispute resolution: complaints.
In particular, FSA's rule DISP 2.8.2R(2) says that we cannot consider a complaint referred to us more than:
In most cases, "Pensions Review invitation letters" were sent to consumers a long time ago. Where a business objects to our considering a case - and it can show that the "Pensions Review invitation letters" were sent to the consumer’s correct address at the time of the mailing - we normally decide that the case is "time barred" under our rules, and so it is not one we can look into.
But where we find that the "Pensions Review invitation letters" were sent to an incorrect address, we are normally able to investigate the merits of the complaint.
If “Pensions Review invitation letters” were not sent or were sent to an old address and the business objects to our considering a case, we will look at what - if anything - was sent to the consumer.
In the case of Glaister v Greenwood (2001), it was decided that a standard booklet from the regulator sent to the consumer in 1995 was written in terms intended to reassure rather than alarm. The court found that because the leaflet was insufficient to make the consumer aware of a possible cause for complaint, it was not enough to start the clock for Limitation Act purposes in this case.
FSA's rule DISP 3.3.4(5) says that we may dismiss a complaint without considering the merits if the business has reviewed the complaint in line with the regulatory guidance.
We sometimes receive complaints where the consumer's pension advice is said to have been reviewed in line with the regulatory guidance. For us to be able to look into the complaint, we would need to be satisfied:
Although there are exceptions, in most cases we decide that the complaint should not be considered.
The Pensions Review regulatory guidance does not cover payments for distress and inconvenience. But as with any other complaint referred to us, we will consider whether an award of compensation for distress, inconvenience or other non-financial loss is appropriate.
The last FSA Pensions Review Bulletin was published in 2004. All of the FSA Pensions Review Bulletins can be found on the FSA's website.
contact our technical advice desk on 020 7964 1400
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