The Financial Conduct Authority (FCA) has today announced that it intends to consult in autumn 2016 to update the methodology used to calculate the levels of redress due in cases of unsuitable advice on transfers from defined benefit (DB) occupational pension schemes to personal pensions.
The current redress methodology used in the industry and by the Financial Ombudsman Service was originally developed for the Pensions Review of the 1990s. It is intended to put consumers back in the position they would have been in had they stayed in the DB scheme. The FCA is concerned that the redress methodology may no longer achieve this objective so has decided to consult on whether to update it. Any changes to the redress methodology will apply to future redress payments.
Where a firm is currently handling a complaint regarding advice given in connection with pension transfers, or receives such a complaint before the outcome of the consultation is known, it should continue to comply with its obligations under the complaints handling rules. These are:
- to investigate the complaint competently, diligently and impartially, and
- to assess the complaint fairly, consistently and promptly.
If, following its investigation and assessment, the firm needs to offer redress under the current methodology, the FCA would not expect it to be fair for the firm to attempt to settle the complaint on a ‘full and final’ basis until the outcome of the consultation is known. The FCA would expect the firm to write to the customer explaining why it is not in a position to provide a final response. However, the firm should also consider what options may be available for dealing with the complaint fairly on an interim basis before the outcome of the consultation is known. For example, if it is able to do so, the firm may offer provisional redress now and then provide a final response and any further redress (where appropriate) once the outcome of the consultation is known.
The FCA recognises that for some consumers this may cause a delay in redress. To minimise delay, the FCA expects to consult in the autumn and reach conclusions by spring 2017.
Update - January 2017
The FCA expects to consult during Q1 2017 on updating the pension transfer redress methodology.