§ Mr. TynanTo ask the Chancellor of the Exchequer what protections exist under the FSA review of personal pension sales in circumstances where a financial loss was recompensed through augmentation of an investor's policy and that policy has subsequently had(a) a market value adjustment reduction applied and (b) a transfer or exit penalty applied. [77882]
§ Ruth KellyThe aim of the pensions review is to provide adequate compensation (where it is due) to investors, at the time of the review. In this respect, the pensions review seeks to replicate the approach a court of law would take to working out compensation when dealing with a claim for damages.
If a firm has provided adequate compensation to an investor, in accordance with the regulatory requirements, any subsequent gains or losses that occur fall outside the scope of the review as the firm would have fulfilled its obligations under the review.
§ Mr. TynanTo ask the Chancellor of the Exchequer what guidance and regulations the Financial Services Authority has issued to personal pension providers under the FSA review of personal pension sales in circumstances where a guarantee of a future calculation of possible financial loss has been favoured over immediate financial recompense being made to a policyholder, with respect to(a) calculation and payment of transfer values in respect of a guaranteed policy and (b) reflection of such guaranteed liabilities by personal pension providers for (i) accounting, (ii) financial statement and (iii) regulatory purposes. [77883]
§ Ruth KellyA benefit guarantee is a guarantee by a life office to an investor to mirror or provide benefits of equivalent value to those that the investor would have had in the occupational scheme, which he opted out of 995W or failed to join. Benefits become payable when an investor dies, retires, or transfers the pension to another company.
In respect of (a), investors who wish to transfer their policy away from the firm must he provided with a full transfer value quotation, which fairly reflects the presence of the guarantee.
In respect of (b), (i) and (ii), there is no guidance which requires firms to reflect their guarantee liabilities separately in their accounts or financial statements. Instead, when reporting their entire pensions review provisions firms will include their guarantee liabilities. In respect of (b) (iii), a firm must give an undertaking to the FSA that its reserving basis for the guarantee is adequate, does not compromise its solvency position and will conform with the requirements of its prudential regulator. The Government Actuary issued guidance to appointed actuaries on the reserving implications of guaranteeing pension benefits linked to individual salaries. This guidance is incorporated within Volume Three of the IPRU (INS) rulebook under the heading DAA9.