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ombudsman news

issue 5

May 2001

treatment of cases involving windfalls

In the February 2001 issue of ombudsman news we noted that the PIA Ombudsman Bureau had received a test case notice relating to a complaint involving windfall payments and the pensions review guidance. The point at issue is whether, when determining the size of compensation due in a pensions review complaint, account should be taken of any windfall repayments the customer received as a result of the advice to take out the personal pension.

The PIA Ombudsman Bureau has supported the parties' submission to the High Court that the case should be heard as soon as is practicable and a hearing is now scheduled for late July. We feel it reasonable, in these circumstances, to await the final result of the court case before we reach a final decision on relevant complaints.

The PIA has set out its current position in Regulatory Update 89 and has allowed regulated firms to suspend a review in the following circumstances:

  • where the case has been progressed to the point where the windfall has become a relevant consideration in calculating loss;
  • where an offer has been made and has not been accepted.

This will clearly have an impact on both the number of pension review cases we receive and our ability to bring to a conclusion those we have already received. However, this does not mean we will suspend all our investigations into cases involving windfalls while we await the outcome of the court case. The first stage of the review procedure is to determine whether, in recommending the customer to opt out of, not join, or transfer from a relevant occupational pension scheme, the firm has been negligent or has failed to comply with regulatory obligations. We see no reason for not progressing this part of the investigation. If we find there has been negligence or non-compliance, we will then move on to examine whether the customer suffered any loss. It is at this stage that we may need to take account of the impact of any potential ruling in the court case. Consequently, we will follow the spirit of Regulatory Update 89 and progress our investigation to the point where the windfall has to be considered.

While we wait for the court's judgment, we see no reason why, after we have concluded that there was initial negligence or compliance failure in an individual complaint, the firm should not then go on to gather the information necessary in order to calculate loss in accordance with the guidance. We believe the calculation should then be undertaken as soon as is practicably possible after the outcome of the test case is known.

Walter Merricks, chief ombudsman

ombudsman news gives general information on the position at the date of publication. It is not a definitive statement of the law, our approach or our procedure.

The illustrative case studies are based broadly on real-life cases, but are not precedents. Individual cases are decided on their own facts.