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Fidelity sets aside further £19m for DC admin error

Tablet-Technology-Computer-Business-700x450.jpgFidelity has set aside a further £19m to cover potential liabilities from an administration error in its defined contribution pensions business, which dates back to the end of 2016.

Accounts for FIL Holdings (UK), published on Companies House on 22 December, reveal the firm has increased its provision by £19m from £3m, as at 1 July 2016, on the back of its investigation into the error.

In total, so far, the business has set aside £21.9m.

This error affects 4 per cent of members in the DC business and relates to some discrepancies in how scheme specific lump sum protection was put in the pension administration records for some of Fidelity’s DC clients.

This protection – also known as protected tax free cash – applied to members of occupational pension schemes who had the right to more than 25 per cent of the value of their pension, tax free, as at 5 April 2006.

Members who were part of a block transfer from an occupational scheme to a group personal pension/stakeholder plan were entitled to keep any protection that may have applied under the previous plan.

This protection only applies if the member takes their benefits from the scheme their savings was transferred to as part of a block transfer.

The potential impact of this admin error in how these protected benefits were recorded include a member having to pay tax on a portion of their benefit that they could have taken as a tax free lump sum.

The accounts, for the 12 months ended 30 June 2017, explain the £22m provision represents the best estimate of what the liabilities might be but these could be revised in the future if needed.

A Fidelity spokeswoman explains action was taken quickly once the problem was spotted.

The spokeswoman says: “We have now reviewed all cases to fully ascertain who was impacted and we are now proactively contacting customers who are affected and compensating so they are put back in the position they would have been in had there been no error.

She adds: “For a large proportion of affected cases there has been no material impact beyond a correction of some information. We are fully focused on doing the right thing for our customers.”

The accounts go on to say the three main assumptions underlying the group’s provision.

These are the number of schemes and clients potentially effected by the processing error; the proportion of these that may result in compensation and the average cost of redress.

The FCA says it does not comment on individual firms.

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