What is DC to DC redress?

It’s common to think of pension transfer loss as relating solely to transfers from occupation defined benefit pension schemes with the resulting loss of potentially valuable guarantees.

However, transfers between defined contribution (DC) arrangements can also lead to investor losses for which the advisor could be liable.  These defined contribution arrangements could be occupational DC schemes, in-house AVC policies, free-standing AVCs, SIPPs or, indeed any other pension arrangement.

If an investor has transferred out a defined contribution pension arrangement on the basis of advice which is later deemed to be unsuitable, it will be necessary to establish whether they have been financially disadvantaged by the transfer. 

Determining the extent of any financial loss can be complicated.

OAC Redress Solutions assist advising firms by using their expertise to provide coherent loss assessment reports which clearly set out the compensation due.  

We deal with:

  • Individual complaints, including those arising from a Financial Ombudsman Service (FOS) decision
  • Larger exercises such as past business review.

Our calculations are fully compliant with FG17/9 and are signed off by an actuary.  Where there is subjectivity in how to approach a case we apply our professional judgement extensive knowledge of the redress industry to ensure fair and robust outcomes so that you can safely leave your calculation in our hands. 

Losses arising on DC to DC transfer

Redress situations we see for DC to DC transfer commonly include one or more of the following issues.

Charges

Were there charges involved in the transfer – for example bid/offer spreads or early redemption penalties?

Are the ongoing charges in the receiving arrangement higher than in the ceding scheme? These charges could include the fees received by the adviser.

Investment returns

Was the receiving scheme invested in overly risky investments, resulting the Investor losing money?  In particular, has the Investor been advised to invest in opportunities which have turned out to be fraudulent and the Investor has lost everything?

Guarantees

Did the ceding arrangement have some guarantees which have been lost on transfer.  These guarantees often taken the form of guaranteed annuity rates on retirement or protected maximum tax-free cash amounts in excess of the standard.

Tax-free cash

The tax-free cash is a valuable benefit.  In some transfer situations, typically when transferring in-house AVCs to an external pension arrangement, the Investor might now have to generate the tax-free cash by commuting defined benefit pension on worse than cost-neutral terms. Their total income in retirement is less than if they had not transferred.

How OAC Redress Solutions help with DC to DC transfer loss assessment cases

Our dedicated team are friendly, approachable, and professional, ensuring that we make the redress process as easy as possible for you.  As a first stage, the team will review the initial case paperwork.  We will then guide you through any decisions that are needed, including how to deal with any missing information. 

We have an established reputation in the redress industry and are known to FOS and the FCA.  We keep up to date with developments in redress and wider pensions to ensure that our calculations are in line with industry best practice. 

Our team has experienced specialists from both life insurance and pensions consulting backgrounds, ensuring that we understand intricate features such as life insurance company charging structure and occupational pension scheme benefit structures

We can assist with all aspects from data gathering right through to drafting of the offer letter.  Our fully flexible offering lets you select which aspects of our services you want so that you can manage your budget efficiently.

We provide a clear summary of the redress calculation in order that both your PI insurer and the investor are satisfied that the compensation offer is fair.  To support this we have comprehensive, user friendly reports, which are straightforward and easy to follow.

Why work with OAC Redress Solutions

OAC’s redress experts will bring extensive knowledge, experience and processes to help your business resolve complex redress issues ensuring you get the right outcome every time.

  • Over 25 years of expertise and knowledge in redress
  • Robust, compliant calculations prepared using established software
  • An adaptable, scalable solution designed to meet your needs.
  • An accessible and professional consultancy service which enables you to understand the complexities of redress so that you can make the right choices for your business

 

Understanding the risk associated with Defined Benefit transfer advice 

Sarah Abraham

For more information
Sarah Abraham
Head of Redress Solutions