Workplace pensions: transfers from a defined benefit scheme and the 'Pensions Review'
Types of complaints we see
The most common complaints we see relating to workplace pensions are where people feel they’ve been unsuitably advised:
- to start a personal pension plan instead of joining their workplace pension scheme
- to opt out of the workplace scheme in favour of a personal pension plan
- to transfer their benefits from a workplace pension (usually from a final salary scheme) to a personal pension plan or a Self Invested Personal Pension (SIPP)
We also get complaints from consumers who say they didn’t receive an invitation to request a pension review and now feel they were given unsuitable advice about a personal pension they took out in the period covered by the review.
We can only look at a complaint about a workplace pension itself if it’s about the way it’s been administered by a business regulated by the Financial Conduct Authority (FCA) – for example a group personal pension arrangement – or if it and its investments have been advised upon by an FCA-regulated business. All other complaints about workplace pensions – for example about the way a final salary scheme has been administered or about payments made by that scheme – are dealt with by the Pensions Ombudsman.
The Pensions Review
In 1994, the industry regulator at the time established the 'Pensions Review' amid concerns about the mis-selling of personal pension policies. The review looked at sales of personal pension policies between 29 April 1988 and 30 June 1994.
If a consumer wanted their pension policy to be considered as part of the Pensions Review, they had to apply before the deadline of 31 March 2000. But if the sale of a personal pension wasn’t included in the Pensions Review – for example, because someone says they didn’t receive an invitation or because they bought their policy after June 1994 – we may still be able to consider a complaint about it.
If a complaint was looked at under the Pensions Review, it’s unlikely that we’d look at it again – the review was designed to deal with any mis-selling issues there and then, and to provide finality for both customers and financial businesses.
But if a consumer thinks there was something wrong with the way you did the review, or they think they should have been included, but weren’t, we might be able to look at it.
Time limits apply to bringing a complaint to us, though. As the Pensions Review finished more than six years ago, we’d need to be satisfied that a consumer has only reasonably had cause for concern within three years of raising their complaint with you.
Advice to transfer out of the British Steel Pension Scheme
In 2017, the Financial Conduct Authority (FCA) became aware of concerns about the financial advice received by members of the British Steel Pension Scheme (BSPS).
If your business advised a former member of the British Steel Pension Scheme (BSPS) to transfer their pension out of the scheme, we have BSPS information for businesses about what to do if they complain about that advice.
You'll also find general information about the FCA’s redress scheme. This includes the deadlines you need to meet and what we’ll check when a consumer complains to us during the scheme.
What we look at
We can look at complaints about advice to not join, opt out of, or transfer a workplace pension scheme in favour of a personal pension plan outside of the Pensions Review dates. And in practice, although they don’t fall under the terms of the Pensions Review as such, we would look at those complaints – and the way any loss should be compensated – in a similar way.
We’ll look at what advice you gave and whether it was suitable for the consumer at the time, taking into account their circumstances and financial objectives. If we decide you gave unsuitable advice, we might uphold the complaint. And we’re likely to tell you to undertake a loss calculation in accordance with the regulator’s guidance for such situations – see below for further information on how to calculate redress.
There may also be instances where we conclude that the advice to either not join, opt out, or transfer away from the consumer’s workplace pension was suitable, but the investments chosen within a personal pension or SIPP weren’t. You can read more about this on our page for assessing the suitability of investments.
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We’ll look at whether you knew, or should reasonably have made further enquiries, about any workplace pension scheme that was available to the consumer – even if they thought that no scheme was available or that they weren’t eligible to join it.
We’ll take into account the individual circumstances of each case. But, in general, because of the financial benefits of joining a workplace pension, we’d usually expect you to have recommended that the consumer join a workplace pension scheme where one was available.
Businesses sometimes tell us they have records of their customer saying they may not stay with their current employer for much longer. Whether it was therefore appropriate for someone to join their employer’s scheme would depend on several factors, including how soon they were planning to leave, and whether the next employer offered a pension scheme. If they did, it’s not likely to have been worthwhile starting a personal pension for a very short space of time.
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When deciding whether the advice to transfer a consumer’s workplace pension funds was suitable or not, we’ll take into account:
- the number of years’ service they’d accrued in the workplace pension
- what other pension provision they had in place
- if moving to a new employer, what type of pension scheme they operated
- how much their personal pension or SIPP would need to grow by to match the benefit they’d given up at the time of the transfer – or for advice given since 1 October 2018 (see below), the cost of purchasing the same defined benefits compared to the transfer value
- their attitude to investment risk
- the period of time left from the transfer until their retirement
- whether there were compelling reasons for the transfer which outweighed the advantages of staying put, such as a need to retire early but no flexibility to do so in the workplace scheme
- whether the consequences of the transfer and the loss of guaranteed benefits (in the case of final salary schemes) were explained
For transfer advice given since 1 October 2018, new requirements have been in place – these were outlined in the regulator’s policy statements PS18/6 and PS18/20.
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In these cases, we may need to consider whether the consumer has brought the complaint to us within our time limits.
As the Pensions Review deadline was 31 March 2000, invitation letters should have been sent to consumers a long time ago. If you object to us considering a complaint, and you can show that the invitation and reminder letters were sent to the consumer’s correct address, we might decide the complaint isn’t one we should look at.
But where we find a Pensions Review invitation letter was sent to an incorrect address and we’re satisfied that the consumer didn’t receive it, we might decide we can look at whether the advice was suitable.
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The Financial Conduct Authority Handbook (DISP 3.3.4(5)) says that we may dismiss a complaint without considering its merits if you’ve reviewed the complaint in line with the regulatory guidance. As set out above, if we think that a case has been properly handled under the Pension Review, it’s unlikely we’d look at it again.
For us to conclude that we should look into a customer’s complaint in a case like this, we’d need to be satisfied that you’d carried out the review incorrectly.
Handling a complaint like this
We only look at complaints you've had an opportunity to look into first. If a customer complains and you don't respond within the time limits – or they’re dissatisfied with your response – they can come to us.
Read more about resolving a complaint and the complaints handling process.
Information we will ask for when we receive a complaint
Once a complaint has been referred to us, we will ask you to provide information about your side of events.
The typical information we would normally expect to see about this type of complaint includes:
- pension review invitation letters or templates if actual letters unavailable
- system evidence to demonstrate review letters sent if letter copies unavailable
- evidence of address tracing, if relevant
- pension review correspondence
If a review and loss assessment was carried out, we will also need to see:
- offer letter
- data and assumptions used in the review
- any post-offer communication
For cases where the business says a review was conducted and there was no cause for concern, you will also need to show us:
- evidence you relied on to establish no cause for concern
We may ask for further information or documents, depending on the circumstances of the case.
Read more about how we handle complaints.
Putting things right
If we think the complaint should be upheld, and reinstating the pension benefits in the workplace scheme isn’t possible, we’ll tell you to calculate whether the consumer’s suffered a financial loss. And this is done by comparing the value of the benefits they would have had with the workplace pension with those they actually have in the personal pension – read more about this on our page about compensation for lost guaranteed pension benefits and how to calculate loss.
If the consumer has suffered a financial loss, we’ll tell you to pay financial compensation to their pension plan, or if that’s not possible, directly to the consumer. This is usually adjusted to allow for the consumer's expected rate of income tax when taking benefits.
We might also make an award for any trouble and upset the consumer’s been caused.
Useful resources
Businesses and consumer advisers can contact our Business Support Hub on 020 7964 1400 for general information on how the ombudsman might look at a particular complaint, or for guidance on our rules and how we work. Or you can search our database of published ombudsman's decisions.
Our work gives us an insight into how complaints arise and how they might be avoided in the future. Find out more about the ways we share our knowledge and experience.
If you’re a consumer, you can read more about how to complain and the complaints we can help with.
