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online technical resource

the Pensions Review


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:

  • "opt outs" - involving consumers who were already members of occupational pension arrangements but who decided to leave and take out a personal pension policy;
  • "non joiners" - involving consumers who were eligible to join occupational pension arrangements but who decided not to join and to take out a personal pension policy instead; and
  • "transfers" - involving consumers who transferred the value of their accrued pension benefits from occupational pension schemes to personal pension arrangements.

how we decide complaints relating to "opt outs" and "non joiners"

We see complaints where the consumer says they should have been advised to join an employer's pension scheme - but the adviser says:

  • it was unaware that an occupational pension arrangement was available to the consumer;
  • the consumer planned to leave their employer after a short time, making membership of the occupational pension arrangement of little or no value;or
  • the sale was done on an execution only basis (For further information on our approach in these cases, see the section of our website on “execution only” sales.)

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.

how we decide complaints relating to transfers

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:

  • the estimated return required to match the benefits being given up at the time of the transfer (the "critical yield");
  • the consumer's attitude to investment risk;
  • the level of any other pension provision the consumer had - and the period of time left from the transfer until the consumer's retirement;and
  • whether the transfer was explained to the consumer - in particular, whether the benefits being given up were considered and explained.

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.

complaints from consumers who say they did not receive an invitation to request a 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:

  • six years after the event complained of or (if later)
  • more than three years from the date when the consumer became aware (or ought reasonably to have become aware) that they had cause for complaint.

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.

complaints from consumers who say they should have been offered redress or more redress than has been offered by the financial business

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:

  • that the review appears to have been carried out incorrectly; or
  • that the regulatory guidance does not address the consumer's circumstances - and so another approach should be taken.

Although there are exceptions, in most cases we decide that the complaint should not be considered.

distress and inconvenience

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.

additional resources

guidance issued for the review of personal pensions

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.

ombudsman news features relating to Pensions Review complaints

  • general principles relating to the Pensions Review
    issue 33, Nov 03 and issue 5, May 01
  • issue 5, May 01
  • consumer disputed redress offered by the business as a "non joiner"
    case study 70/07, June/July 08
  • business makes offer of redress that differs to regulatory guidance
    case study 33/5, Nov 03
  • consumer to be reinstated in occupational scheme but disputes request from business to make up "underpayments" between her personal pension premiums and the premiums payable to the occupational pension
    case study 11/15, Aug 01
  • consumer rejected redress calculated using Pensions Review assumptions but further calculations using more accurate information produced a lower loss
    case study 11/14, Nov 01
  • dispute whether consumer had appropriate attitude to investment risk for a transfer from an occupational pension scheme
    case study 05/11, May 01
  • business calculated redress in line with the Pensions Review guidance but deducted an "early retirement penalty" because benefits were taken before age 60
    case study 22/7, Nov 02

help for businesses and consumer advisers

contact our technical advice desk on 020 7964 1400

This is part of our online technical resource which sets out our general approach to complaints about a wide range of financial products and issues. We would like your feedback on how helpful you found it. Please also use the feedback form below to tell us about anything you think we could clarify or explain better.

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  • The law requires us to decide each case on the basis of our existing powers and what is fair in the circumstances of that particular case.
    We take into account the law, regulators' rules and guidance, relevant codes and good industry practice at the relevant time.
    We do not have power to make rules for financial businesses.
    Our current approach may develop in the light of circumstances disclosed by further cases we receive.
    We may decide that fairness requires a different approach in a particular case.