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Life offices to bear brunt of new redress payments

Life offices will shoulder most of the costs under PIA plans to give extra redress to 25,000 pensionholders whose phase-two transfer cases were completed before December 17, 1999.

An estimated £3,250 will be paid to each of the policyholders, out of an original 1.2 million pension review cases.

Only around 2,800 are IFA clients, with just 1,000 cases from smaller firms with fewer than three RIs.

Because of the comparatively low proportion of IFA cases, proposals under consultation mean that life offices will be forced to pay 85 per cent of the costs.

The cases in question were settled correctly by the industry on the basis of the PIA&#39s pension review guidance in place at that time. However, this guidance was later found to understate redress in some cases completed before December 17, 1999.

IFAs firms will be required to provide information on the relevant cases from their files but the regulator says it is trying to ensure the work required of firms is kept to a minimum amid concern that providing additional redress could cause financial hardship for smaller IFAs.

FSA director of pension review Philip Robinson says: “The numbers involved are very small in proportion to the whole review but it cannot be right for those who were at the front of the queue when their case was completed to lose out on redress due to them. These proposals ensure investors who did not get enough redress benefit from the new guidance.”

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