The attached model guidance issued by the Financial Services Authority (FSA)
sets out procedures and standards which PIA and other frontline regulators
are expected to adopt for ‘phase 2’ of the review of pension transfer and opt
out/non-joiner business sold between 29 April 1988 and 30 June 1994. The
PIA Board, having taken account of representations made to it in response to
the Consultation Paper 7, has decided for the purposes of PIA rule 7.2.2(2),1 to
adopt this guidance subject to the following modiﬁcations.
Firms will see that the principal difference between the approach used for the
priority review and that now introduced by the FSA for ‘phase 2’ arises in the
area of investor identiﬁcation (and thereafter in the procedures for collecting
information from investors where a review is required). Indeed, the FSA model
guidance states (paragraph 2) that beyond these initial stages, the ‘procedures
and standards for the case review process . . . (i.e. for any further gathering of
information and for assessing loss, compliance, causation and redress) remain
unchanged from those set out in guidance previously issued by the SIB’.
In the interests of continuity for its members, the PIA Board have modiﬁed this
part of the guidance so that PIA ﬁrms should, for any further gathering of
information and for assessing loss, compliance, causation and redress,
continue to use guidance previously issued by the PIA2 (other than where it
relates to the ‘Accord’ – see below).
As was stated in Consultation Paper 7, (jointly produced by the PIA and the
FSA), and is restated in the ﬁnal policy statement published with this guidance,
PIA considers the design of the phase 2 review to be consistent with the
Accord reached for the purposes of the priority review with the majority of
insurers which provide professional indemnity (PI) insurance cover to PIA
Under Rule 7.2.2 (2) PIA may prescribe the standards and a speciﬁcation for the conduct of any review of any aspect
of investment business which PIA requires its members to undertake.
Pension Opt-Outs and Non-Joiners Section 1 published April 1995, Transfers Section 2 published July 1995, Redress
Assessment Section 2 published August 1995, Notes on the Pension Opt-Outs and Non-Joiners and Transfers Review
published December 1995, Simplifying the Pensions Review: Statement of Policy published January 1997. In addition
the PIA has published a number of statements relevant to the review including various regulatory updates.
regulated ﬁrms (the ‘Accord’). PIA therefore sees no case which would
necessitate a different approach for ﬁrms with PI cover and has therefore
decided that the terms of model guidance for phase 2 now published by the
FSA (and modiﬁed as stated above) should be applied to all ﬁrms regulated by
As a result, the PIA Board has decided that where members have cases to be
reviewed they may (with effect from 14 August 1998) adopt one of only two
approaches to phase 2 of the pension review. They may either:
Approach 1: adopt the direct invitation approach as speciﬁed in the attached
model guidance (in which case they must wait until 4 January
1999 to start direct invitation mailings, in order to co-incide
with the publicity campaign which is an integral part of this
approach for phase 2); or
Approach 2: adopt the all-to-return priority review procedures3 (in which case
they may start phase 2 as soon as they wish).
The modiﬁed letters used by ﬁrms subject to the Accord during the priority
review (the ‘Accord letters’4) may not be used for phase 2 cases with effect
from 14 August 1998.
This decision reﬂects the PIA Board’s view that the ‘direct invitation’ letters
speciﬁed in the attached guidance are consistent with the priority review
‘Accord’, and that it is not in the interests of either consumers or ﬁrms (both
of which prefer clarity and simplicity in review procedures) for two types of
direct invitation mailings to co-exist side by side. Where ﬁrms with PI
insurance are prohibited by their insurer from using Approach 2 above, the
Board is aware that the decision has the effect of preventing such ﬁrms from
getting on with phase 2 before 4 January 1999. It has taken the view that this
position is justiﬁable given that the younger and less pension-aware nature of
the phase 2 population makes a publicity campaign integral to the phase 2
direct invitation approach; and further that, in order to allow time for
consumer and industry bodies to advise on the design of that campaign, it
cannot start before next year.
Where ﬁrms decide to use Approach 1, any transfer cases not already being
reviewed should be mailed in accordance with paragraph 13 of the attached
model guidance. Where ﬁrms are able to identify investors as opt outs or non-
joiners (even though they will not have completed a Pension Review Form),
these investors should be mailed in accordance with paragraphs 16 and 17 of
the attached model guidance. Any remaining investors (other than those who
Including the Identiﬁcation and Gathering Information procedures set out in Pension Opt Outs and Non-Joiners
Section 1 published April 1995 and Transfers Section 2 published July 1995.
Published in The Pensions Review Essential Step in March 1996.
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took out a rebate-only policy) should be mailed in accordance with
paragraphs 18 and 19.
Until 30 June 1999 (or later if required by the PIA), all ﬁrms that used
‘Accord’ procedures for priority cases must put procedures in place for the
automatic review of phase 2 cases where the investor dies or retires. (They do
not, however, need to introduce such procedures in respect of priority cases.)
Where ﬁrms using the Accord have, by 14 August 1998, already contacted
phase 2 investors using the Accord procedures (including the prescribed
‘Accord letters’), there is no need for ﬁrms to contact these investors again.
Any follow up letters still outstanding should be sent, but no additional
investors should be contacted using this method. There is no requirement for
ﬁrms who have done this to contact the PIA for credit for work done. Firms
should of course be able to demonstrate if asked to by the PIA that they have
applied the appropriate standards to all cases. Where this work has not been
carried out correctly and to an adequate standard, ﬁrms may be required to
take remedial action.
Where ﬁrms using the Accord are in the process of carrying out remedial work
at the request of the PIA involving the Accord procedures this should
Firms may have used letters other than the Accord letters to invite potential
phase 2 investors to request a review. Alternatively, they may have altered
Accord letters, for example to include reference to the investor being ‘non-
priority’. Consistent with paragraph 58 of the attached model guidance, any
phase 2 investors who have not responded to this (non-Accord) invitation
positively (i.e. they have not asked for their case to be reviewed) should be
dealt with in accordance with the attached model guidance. Such investors will
therefore receive another invitation to request a review after 4 January 1999.
Finally, ﬁrms may have already been told by a phase 2 investor (in response to
an Accord letter or otherwise) that they do not want their case to be reviewed.
Consistent with paragraph 59 of the attached guidance, ﬁrms do not need to
write again to such investors. However, during the currency of phase 2, should
such investors wish to re-consider their decision (perhaps in response to seeing
the publicity campaign), a ﬁrm should agree to review their case in response to
As with the review of priority cases, PIA encourages all ﬁrms with PI insurance
to keep their insurers fully informed of the steps that they are taking in
conducting the phase 2 review.
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