The complaint was upheld against Standard Life but not against BAE Systems pension funds trustees.
Mr White was an existing member of the BAE Systems pension scheme AVC when Standard Life was appointed as additional voluntary contributions provider in April 2001. Members were able to continue investing in their existing fund(s) or switch to a choice of Standard Life funds selected by the trustees. Throughout the operation of the scheme the trustees provided members with bespoke leaflets prepared by Standard Life which contained information about the funds.
In 2002 a Standard Life leaflet stated that the fund was the only option under ‘secure funds’ and described it as offering ‘the highest level of unit price stability’. It was listed as investing ‘not only in bank/building society deposits’ but also as holding ‘other short-term sterling assets’. Later in 2002 a letter from the trustees referred to the fund as ‘Standard Life’s cash fund’. During 2002 Mr White redirected all of his additional voluntary contribution investments to the fund.
In a leaflet issued in December 2007 Standard Life stated in the fund’s description that some of the ‘cash investments’ were ‘not ‘guaranteed’ in the same way as high street bank or building society accounts’ were and that “in extreme circumstances it is possible that the value of the fund may fall’. It also noted that under the Cash Lifestyle Profile – the default fund for members who do not make an investment choice – pension investments switch to the fund three months before retirement and further stated that the fund was suitable for members expecting to use some of their AVC benefits to secure a tax-free lump-sum. Mr White claimed that he did not receive this leaflet and that he was not aware of it until after he retired, but acknowledged that he received Standard Life’s leaflet with the same information in November 2008.
On 14 January 2009 the fund’s price fell by 4.8 per cent. Although the fund had been promoted as low risk, since 2007 around half of the funds under management had been invested in mortgage-backed securities (asset-backed floating rate notes) which incurred significant losses as a result of the housing market collapse.
In June 2009 the trustees advised scheme members of the loss and that Standard Life had made a payment into the fund to restore the position as if the loss had not occurred (in acknowledgment that many investors were not aware of the risks of investment strategies that had not clearly been set out in their literature).
Mr White continued to contribute to the fund until 31 July 2009 and retired on 1 August 2009.
In January 2010 the FSA issued a report in which it found that despite the fund being largely invested in asset-backed securities from July 2007, Standard Life had failed to disclose this. Standard Life was fined £2.45m for the publication of misleading marketing material for the fund.