The ABI and Aifa are disputing the FSA's guidance for calculating redress for pension mis-selling. ...
The ABI and Aifa are disputing the FSA's guidance for calculating redress for pension mis-selling.
In light of this, they are also claiming their members will not be able to provide redress for mis-selling by the regulator's target date of December 2002. The issue centres on a landmark court case where the FSA's interpretation of its consequences differs from legal opinion supplied to several life offices, according to Aifa.
The case of Needler v Taber concluded that windfall benefits of a demutualisation should not be taken into account when calculating redress for pensions mis-selling. The ABI and Aifa are concerned that the FSA's interpretation goes wider than this, extending beyond windfall benefits, which were covered by the case, to include the reallocation of orphan assets, topping up bonuses and policies.
The FSA's view is included in draft guidance to intermediaries, consultation paper 126.
If the FSA's interpretation remains, this would be time consuming for intermediaries and create further work, making even the extended pensions redress deadline of December far too early, the ABI has said. Aifa is proposing instead that March 2003 is a more realistic deadline.
Another concern of the two trade associations is the need for individual companies and circumstances to be taken into account when looking at windfall benefits, something the ABI has said the FSA's guidance does not take into account.
Paul Smee, director general of Aifa, said: 'We have been involved in discussions with FSA and ABI regarding the FSA's legal interpretation of the Needler judgement.
'While Aifa has not sought independent legal advice, we are concerned to learn that FSA's approach conflicts with counsel's opinions obtained by individual ABI members. Our members are reliant on life offices being able to deliver policy values on a compliant basis and any disputes over the establishment of what constitutes relevant benefits will impact on an adviser's ability to complete a review case.'
FSA intends to issue final guidance by 31 July 2002 and is proposing a completion date for affected cases of 31 December 2002. The FSA does not intend to apply the guidance retrospectively.
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