FCA to update pension transfer redress rules

"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."

In a statement, it said that the current methodology was originally developed for the Pensions Review of the 1990s and may no longer be suitable. It aims to put consumers back in the position they would have been if they had stayed in the DB scheme.

The regulator said that if a firm needs to offer redress under the current methodology, it should continue to investigate but not attempt to settle the complaint on a ‘full and final’ basis until the outcome of the consultation is known.

The FCA said it recognises that "for some consumers this may cause a delay in redress" and expects to consult in the autumn and reach conclusions by spring 2017.

Its statement continued: "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."

Steven Cameron, Pensions Director at Aegon, commented: "Rather than start with a review of redress methodology, it would seem more logical to review appropriate means of analysing what constitutes suitable advice on transfers out of defined benefit schemes. The pension freedoms mean a straight comparison against the cost of an annuity is no longer appropriate with some transferees placing a high value on the new flexibilities. And the current issues around defined benefit scheme security also need factored in. Any review of redress methodology could follow as a next stage."