The PIA Ombudsman Bureau is to delay the calculation of redress in pension mis-selling cases which i...
The PIA Ombudsman Bureau is to delay the calculation of redress in pension mis-selling cases which involve demutualisation windfalls, writes Robert Stock in Investment Week.
It is waiting on the results of a test case still to come before the courts before continuing with the process.
Windfall gains made by clients pursuing mis-selling claims are not taken into account when the PIA Ombudsman calculates how much redress an IFA found culpable of mis-selling has to pay to a client.
The test case taken by professional indemnity insurers Collegiate, acting on behalf of an IFA, will decide whether credit for a demutualisation share windfall should be given in calculating redress in the particular pensions review case.
Once the test case has been decided the PIA will formulate its policy. If the case is decided after N2, the as-yet-unspecified date at which the FSA receives its full powers, the FSA will issue its policy response.
Iris Baker spokesperson for the PIA Ombudsman Service, said: "The Ombudsman has issued a decision accepting that the arguments made by the firm are, on the face of it, reasonable, and confirming that we will cease investigating the complaint. Where a firm requests that the calculation of redress is deferred until the court has decided the test case, we will not conclude our investigation."
The decision to put a hold on calculating redress in such cases until after the test case is concluded has been welcomed by AIFA, which does not believe that IFAs who pay redress will be able to claim back the value of any windfalls at a later date.
Fay Goddard, director of policy and technical services at AIFA, said: "The PIA issued Regulatory Update 33 in May 1997 prohibiting any benefits received by investors from being taken into account when assessing loss in a pension review case.
"This has long been considered unjust by many IFAs and is contrary to the ombudsman's usual policy of deducting the value of demutalisation benefits from redress in cases other than those covered by the PIA Pension Review Guidance."