A recent policy statement from the Financial Conduct Authority has changed the redress process for pension transfers gone wrong in more ways than some might think.
Following a consultation in 2022, the FCA published "Policy Statement 22/13: Calculating redress for non-compliant pension transfer advice" in November 2022. The new requirements took effect in April 2023.
Much of the discussion around PS22/13 to date has centred on changes to the assumptions adopted within redress calculations.
However, there are also new requirements for the redress process itself, including specific instructions on how firms should engage with consumers.
Overview of the new requirements
The previous redress guidance, FG17/9, was relatively concise and primarily aimed at actuaries performing redress calculations.
In contrast, PS22/13 is a comprehensive document that covers each stage of the redress process. And because it has been codified into the FCA handbook in Dispute Resolution Appendix 4, "Handling pension transfer redress calculations", IFA firms will need to be familiar and comply with it.
The content of DISP Appendix 4 broadly covers the following areas:
- application – setting out the circumstances in which it applies;
- the mechanism for paying redress – confirming that redress must be offered as cash, with an option for consumers to request redress via augmentation;
- gathering the information needed to perform a redress calculation – setting out the process that IFAs are expected to follow and what to do if data is not available;
- actuarial methodology for determining redress – providing a detailed explanation of the way in which redress must be calculated;
- the derivation of the actuarial assumptions used in the redress calculation – explaining precisely how the assumptions must be determined; and
- communicating the redress offer – outlining the information that must be given to consumers when they receive their offer of redress.
It therefore incorporates some content that will be best understood by actuaries, and some that will be accessible to a wider audience.
It is worth noting that the revisions to the redress guidance were carried out in parallel with the development of the British Steel consumer redress scheme (the rules of which are set out in the separate PS22/14).
Some of the provisions of PS22/13 are likely to have been influenced by the FCA’s experience with British Steel calculations.
Application of the new requirements
DISP Appendix 4 applies to any complaint received by an advising firm after April 1Â 2023, as well as any complaint received before that date that was not settled before April 1Â 2023.
