This appendix sets out the rules and guidance about the steps firms should take and the assumptions firms should use to:
calculate the redress (if any) to offer to a consumer, their spouse or their dependant(s) for non-compliant pension transfer advice which resulted in the consumer transferring out of a defined benefit occupational pension scheme and into a defined contribution pension scheme; and
make a redress offer to a consumer or their beneficiary.
This appendix applies to any redress calculation and redress offer relating to non-compliant pension transfer advice arising as a result of:
a complaint received by a firm on or after the commencement date;
a complaint received before the commencement date where the firm has not issued a redress offer to the consumer on or before that date;
any other redress exercise carried out by a firm; and
a requirement in CONRED 4 (British Steel Consumer Redress Scheme).
This appendix also applies to redress calculations and redress offers where a firm upholds a complaint received after 3 August 2016 about a pension transfer between 29 April 1988 and 30 June 1994 in circumstances where either:
the firm did not review the relevant pension transaction in accordance with the regulatory standards or requirements applicable for the review of the transaction at the time; or
the particular circumstances of the case were not addressed by those standards.
Where a firm upholds a complaint concerning a non-joiner, pension opt-out or FSAVC case, the firm may use this appendix as a basis for calculating and offering redress, to the extent that it is appropriate to do so and subject to the particular circumstances of the case.
This appendix should be considered alongside applicable rules and guidance in DISP 1. Where this appendix does not address the particular and individual circumstances of a consumer’s complaint, a firm should address such circumstances:
in a way which is consistent with the rules and guidance in this appendix; and
in accordance with their obligations in DISP 1.4.1R.
Firms should also consider how the Financial Ombudsman Service has taken account of such circumstances when determining similar complaints (DISP 1.4.2G).
To the extent that taking them into account would be consistent with a firm’s obligations in this appendix and DISP 1.4.1R, relevant guidance in DISP 1.4.2G(3) includes the provisions designated by the Financial Services Authority in November 2001 in the Designation of Pensions Review Provisions Instrument 2001 (as amended).
When calculating redress in accordance with this appendix, firms should:
take into account all relevant factors, including any known or anticipated changes in circumstances which may impact on the value of the redress which would be appropriate; and
act fairly when assessing what redress is appropriate in light of such circumstances.
In DISP App 4.2.5G(4)(a), relevant changes in circumstances may include changes in the value of the consumer’s notional rights in a ceding defined benefit occupational pension scheme, which are certain and quantified, and which are known, or reasonably ought to be known, by the firm at the calculation date.
A firm must use an actuary or an approach approved by an actuary when undertaking calculations in accordance with this appendix to calculate:
the valuation of the benefits in a defined benefit occupational pension scheme given up by a consumer; and
the value of the consumer’s DC pension arrangement, where adjustments are necessary to obtain the current value.
A firm may use actuarial software which is compliant with technical actuarial standards to undertake the relevant calculations, to the extent that they have the competence to do so.
The type of adjustments where firms should confirm their approach with an actuary include removing the effect of contributions into the consumer’s DC pension arrangement that were not part of the cash equivalent transfer value.
If a firm has had confirmation from an actuary that its approach to relevant elements of the valuation is appropriate, that approach can be used for materially similar cases without needing to obtain actuarial approval each time.
If a firm lacks competence to carry out any parts of the redress calculation in this appendix, including rolling up payments to allow for the passage of time, it should refer to an actuary.
Notwithstanding this appendix, a firm may offer to arrange for the consumer to be reinstated into a defined benefit occupational pension scheme, where it is possible to do so, or offer to set up a pension arrangement with safeguarded benefits for the consumer in place of paying redress if it is agreed to by the consumer.
A firm may only offer to set up a pension arrangement with safeguarded benefits (such as a deferred annuity or pension annuity) in place of the payment of redress after the firm has calculated and informed the consumer of the redress offer which would otherwise be payable in accordance with this appendix.
Any pension arrangement with safeguarded benefits set up by the firm should provide benefits to the consumer which are no less than the value of the benefits the consumer would have received from their defined benefit occupational pension scheme.
If a firm offers to set up a pension arrangement with safeguarded benefits in place of paying redress, the firm must:
make a personal recommendation to the consumer about the suitability of the pension arrangement with safeguarded benefits which complies with the rules on assessing suitability in COBS 9;
clearly inform the consumer that they are not required to accept a pension arrangement with safeguarded benefits and can instead receive redress as a cash lump sum payment or by augmentation in accordance with DISP App 4.3.33R; and
not require the payment of any fees or charges by the consumer in connection with either the setting up of a pension arrangement with safeguarded benefits or the personal recommendation made by the firm.
