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redress for pension mis-sale cases that fall outside the Pensions Review

This technical note explains how — since 1 October 2005 — we have dealt with redress for complaints about pension sales that fall outside the period covered by the regulatory "Pensions Review". We take a different approach to these complaints because they are not a “closed” group relating to a specific fixed period, as Pensions Review cases were.

background

For the Pensions Review, the regulators at that time (the PIA and subsequently the FSA) laid down a methodology and assumptions (for example, the discount rate to be used to value future benefits) which the regulator revised from time to time — for the last time in April 2003.

The Pensions Review has now drawn to a close. And the FSA's Pensions Review Bulletin 27 announced that — unless exceptional circumstances arose — it would not be updating those assumptions last revised in April 2003. It said that firms should continue using those assumptions for Pensions Review cases, regardless of the future date of settlement.

This raised the issue of what approach firms and the ombudsman service should take for similar pension cases falling outside the boundaries of the Pensions Review. We liaised with the FSA about this. Given the relatively small number of customers with outstanding cases, the FSA decided that it was not appropriate for it to sponsor the updating of the assumptions.

However, the ombudsman service and the Financial Services Compensation Scheme (FSCS) agreed that there would be benefits for all concerned if there was greater certainty about the methodology and assumptions that should be applied — in cases outside the boundaries of the reviews.

And so the ombudsman service invited the chairman of the (then) Investment Liaison Group (on behalf of the financial services sector) and the chairman of the Financial Services Consumer Panel (on behalf of consumers) to nominate an expert each to provide input.

The ombudsman service, the FSCS and the two experts met and agreed to commission updated figures from PricewaterhouseCoopers, who had previously advised the FSA on appropriate assumptions for the Pensions Review.

With effect from 1 October 2005 to 3 August 2016, redress in pensions cases that fall outside the Pensions Review has normally been based on the assumptions reviewed annually by PricewaterhouseCoopers:

1 July 2016 | 1 July 2015 | 1 November 2014 | 1 July 2014 | 1 July 2013 (including mortality assumptions) | 1 July 2012 | 1 July 2011 | 1 July 2010 | 1 July 2009 | 1 July 2008 | 1 July 2007 | 1 July 2006 | 1 October 2005

2017 FCA consultation on pension redress methodology

In August 2016, the FCA announced that it would be launching a consultation on updating the methodology used to calculate the redress owed to consumers who were given unsuitable advice to transfer out of defined benefit pension schemes pension review redress methodology. In March 2017, it set out its proposals. The consultation ended in June 2017, and the FCA’s finalised guidance was released in October 2017.

As a result, for complaints that fall outside the Pensions Review, redress should now be based on the FCA’s October 2017 guidelines and assumptions, and any subsequent updates to this. This applies to complaints received by a firm after 3 August 2016 and for complaints received before 3 August 2016 but not settled on a full and final basis before that date.