PIA Update: Pensions review

United Kingdom

With the deadline for the completion of Phase 1 cases having passed, the pensions industry is waiting to see who will be the first victim of the PIA warning, issued on 17th November, that failure to complete Phase 1 on time may be a disciplinary matter.

The regulators continued to issue guidance on the conduct of Phase 2 as late as 10th December 1998, less than a month before the initial mailings had to begin. This guidance explained that investors with rebate-only policies who were aged 30 or more at the time of the sale would receive a 'direct invitation', whereas those aged under 30 would receive an FSA fact sheet alerting to them to their right to request a review. The Phase 2 mailings must be issued between January and April 1998, and firms should be working busily to ensure that they meet this deadline. In particular, firms should be aware that they were not permitted to issue mailings early as the mailings were intended to coincide with the FSA's high-profile publicity campaign. Therefore, investors who were issued with Phase 2 mailings prior to 4th January 1998 may need to be re-mailed.

In its new Pensions Review Bulletin No. 1, FSA has issued further elaborative guidance on the effect of a change in employment upon loss calculations and redress liabilities. FSA has pointed out that a change of employment may, but does not automatically, have the effect of limiting the financial loss suffered by an investor. It may be that the investor continues to suffer loss if the original advice meant that they did not join their new employer's scheme. However, given that the earlier guidance from the regulators was not entirely clear on this matter, PIA and FSA have explained that they do not expect their regulated firms to start work on reviewing subsequent periods of employment until the date for completion of priority cases has passed. Firms should now consider whether they dealt with such cases appropriately.