CONRED 4 Annex 21 BSPS DBAAT and BSPS Redress Calculator Instructions

11

Introduction

Limitation on use

1.1

G

The suitability assessment toolkit reproduced at CONRED 4 Annex 20R (referred to in these instructions as the ‘BSPS DBAAT’) and instructions in this Annex are to be used only for the purpose of complying with the requirements under CONRED 4 to assess pension transfer advice provided to BSPS members during the relevant period. They should not be used for any other purpose.

1.2

G

Unless otherwise stated, nothing in CONRED 4 affects how the FCA DBAAT operates.

Definitions

1.3

R

In this section we use the following definitions:

(1)

‘assessor’ means the person filling in the BSPS DBAAT, either at the firm or on behalf of the firm;

(2)

‘available evidence’ means the information collected by the firm and held on the consumer file or information received from a consumer;

(3)

‘BSPS’ has the meaning in CONRED 4.1.1R(1);

(4)

‘BSPS2’ has the meaning in CONRED 4.1.1R(2);

(5)

‘BSPS DBAAT’ has the meaning in CONRED 4.1.1R(4);

(6)

‘Causation Section’ is the tab on the BSPS DBAAT Excel Spreadsheet that records whether the firm’s failure to comply with the suitability requirements is the effective cause of the consumer’s loss;

(7)

‘comparator scheme’ means, other than as provided by CONRED 4 Annex 21 13.1R(4):

(a)

(if the advice was given on or before 16 May 2017) BSPS;

(b)

(if the advice was given from 17 May 2017 to 11 October 2017) either or both of BSPS and PPF; and

(c)

(if the advice was given on or after 12 October 2017) BSPS2 and PPF;

(8)

‘FCA DBAAT’ has the meaning in CONRED 4.1.1R(11);

(9)

‘information requirements’ are the requirements in force during the relevant period and are:

(a)

COBS 9.2.1R(2);

(b)

COBS 9.2.2R;

(c)

COBS 9.2.3R;

(d)

COBS 9.2.6R; and

(e)

COBS 19.1.2R;

(10)

‘instructions’ means this Annex;

(11)

‘Information Section’ is the tab on the BSPS DBAAT Excel Spreadsheet that collects information about the firm’s compliance with the information requirements that is relevant to the assessment of suitability;

(12)

‘material information gap’ has the meaning in CONRED 4.1.1R(12);

(13)

‘NRD’ is the normal retirement date in the comparator scheme;

(14)

‘pension benefits’ has the meaning in CONRED 4.1.1R(13);

(15)

‘PPF’ means the Pension Protection Fund;

(16)

‘relevant period’ is defined at CONRED 4.1.1R(16);

(17)

‘scheme case’ is defined at CONRED 4.1.1(17);

(18)

‘suitability requirements’ are the requirements in force during the relevant period specified at CONRED 4 Annex 21R 7.1R and are:

(a)

COBS 9.2.1R(1); and

(b)

the common law duty in contract or tort to exercise reasonable skill and care in advising the consumer on pension transfers;

and that were in force during the relevant period and applicable to a scheme case;

(19)

‘Suitability Section’ is the tab on the BSPS DBAAT Excel Spreadsheet that records the assessment of the firm’s compliance with the suitability requirements;

(20)

‘transfer value’ is the cash equivalent transfer value or CETV;

(21)

‘transfer value analysis’ is the analysis a firm was required to carry out during the relevant period, in accordance with the requirements at COBS 19.1.2R; and

(22)

‘two-adviser model’ has the meaning in CONRED 4.1.1R(21).

2

Using the BSPS DBAAT

2.1

G

The BSPS DBAAT contains factors for the firm’s assessor to take into account to determine whether there has been a failure to comply with the suitability requirements in a scheme case. The instructions are addressed to the assessor carrying out the review.

2.2

R

The BSPS DBAAT is a Microsoft Excel workbook divided into 5 ‘sections’, using worksheet tabs, which must be completed in full except where indicated in these instructions.

2.3

R

Before completing the BSPS DBAAT, an assessor must familiarise themself with the features, benefits and risks of a pension transfer from BSPS, including the features, benefits and risks in general of a pension transfer that a reasonably competent firm should have identified, as illustrated in CONRED 4 Annex 22G at Table 1.

2.4

R

The assessor must answer the questions in the BSPS DBAAT and complete the assessment by reference to the available evidence, and where specified the information available to advisers during the relevant period listed in CONRED 4 Annex 22G at Tables 2 and 3.

2.5

R

All answers should be based on information obtained up until the date the firm gave the advice or arranged the pension transfer, unless otherwise stated.

2.6

G

When completing the BSPS DBAAT, an assessor should ensure that the information they enter, including, without limitation, all values, notes, additional comments, rationale and evidence, is sufficiently detailed for a third-party assessor to:

(1)

gain an accurate and complete overview of the relevant evidence on the consumer file; and

(2)

form a view without the need to refer to the relevant evidence as to whether the firm has collected the necessary information to assess suitability and, where applicable, complied with the suitability requirements.

2.7

G

The BSPS DBAAT uses colours to indicate whether fields have been completed. Blue indicates fields still to complete. Grey indicates fields that may not have to be completed, depending on the answer to a question.

2.8

G

The diagram at 2.9G explains the scheme steps in diagrammatic form, with reference to the relevant sections of the instructions and CONRED 4 rules.

2.9

G

The steps to complete a BSPS DBAAT are set out below.

3

Use of FCA DBAAT

3.1

G

If CONRED 4.3.2R(2) applies and the firm uses a non-BSPS DBAAT to complete the first step under CONRED 4.3.2R, it should have regard to the differences between the BSPS and non-BSPS DBAAT and refer to relevant sections of the instructions to identify whether their FCA DBAAT or assessment requires amendment. The material changes include:

(1)

In the Information Section:

(a)

Information Area 4 is not present in the BSPS DBAAT and the remaining Information Areas have been renumbered;

(b)

Information Area 7 in the BSPS DBAAT on the comparator scheme (area 8 in the non-BSPS DBAAT) has been significantly revised;

(c)

Information Area 9 in the BSPS DBAAT on the transfer analysis (area 10 in non-BSPS DBAT) has been significantly revised.

(2)

In the Suitability Section:

(a)

the addition of evidential provisions in respect of Examples 1 to 11;

(b)

new Example 11 has been inserted in the BSPS DBAAT;

(c)

Example 11 from the non-BSPS DBAAT becomes Example 12;

(d)

Example 12 from the non-BSPS DBAAT has been removed.

(3)

The Suitability Investment Advice, Disclosure and Insistent Client Sections have been removed.

4

General instructions

4.1

R

An assessor must complete a separate BSPS DBAAT for each consumer and:

(1)

if the consumer has more than one period of service in the BSPS, complete a separate BSPS DBAAT for each period of service;

(2)

if the consumer received connected advice on pension transfers from a non-BSPS ceding arrangement within 6 months of the BSPS advice, have regard to how the connected advice factors into the advice to transfer the consumer’s BSPS scheme.

4.2

G

For the purpose of 4.1R, advice on a pension transfer from a non-BSPS ceding arrangement is likely to be connected with advice to transfer from BSPS if the advice on the other scheme is integral to the consumer’s decision to transfer from the BSPS.

4.3

R

Where the consumer is married or has a partner, complete the BSPS DBAAT on a joint life basis unless the consumer has instructed the firm to advise on a single life basis and their spouse or partner has confirmed that they have sufficient retirement provision of their own.

4.4

R

Where it is necessary to use multiple BSPS DBAATs:

(1)

use the first BSPS DBAAT for the ceding arrangement offering the largest transfer value;

(2)

label the completed BSPS DBAATs with the consumer’s name and the number in sequence order that the BSPS DBAATs were completed;

(3)

re-use the relevant information from the first BSPS DBAAT in any connected BSPS DBAATs and ensure that the following sections are completed using the available evidence about the consumer and the ceding arrangement the BSPS DBAAT relates to:

(a)

case details;

(b)

Information Area 1 – ‘has the firm obtained the essential facts about the consumer?’;

(c)

Information Area 7 – ‘has the firm obtained the necessary information about the consumer’s pension benefits?’;

(d)

Information Area 8 – ‘has the firm obtained necessary information regarding the proposed arrangement?’; and

(e)

Information Area 9 – ‘has the firm carried out the transfer analysis?’; and

(4)

clearly cross refer between the BSPS DBAATs.

5

Information Section

5.1

R

An assessor must take these 6 actions to complete the Information Section:

(1)

Enter ‘case details’ of the file review and assessor alongside details of the firm, adviser and pension transfer specialist (as recorded on the Financial Services Register) and the charging basis for the advice.

(2)

Record the relevant information from the available evidence under each of the 9 Information Areas, following the instructions under each area heading.

(3)

For each Information Area, decide whether the firm has complied with the information requirements and obtained the necessary information to assess suitability and answer ‘yes’ or ‘no’ to each ‘area question’.

(4)

Depending on the answers to questions in Information Areas 1 to 9, the BSPS DBAAT will give the firm’s information collection 1 of 3 indicative ratings. To complete this action, refer to the instructions at CONRED 4 Annex 21R from 5.3R to 5.7R and select from the drop-down list one of the following ‘assessor’ ratings:

(a)

‘Compliant – Proceed to suitability assessment’ – the firm has complied with the information requirements and collected the necessary information to assess suitability. Proceed to the Suitability Section of the BSPS DBAAT.

(b)

‘Non-compliant – Material Information Gap’ – the firm has not complied with the information requirements and so it is not possible to assess suitability. Complete action (5) before finalising this rating.

(c)

‘Non-compliant - However enough information to assess suitability’ – the firm has not complied with the information requirements and has taken the steps at CONRED 4.3.5R but there is sufficient information to conclude that the advice was likely to be unsuitable. Proceed to the Suitability Section of the BSPS DBAAT.

(5)

If 4(b) applies, follow the steps in CONRED 4.3.5R to obtain the missing information, then carry out actions 5.1R(2) to (4) again and finalise the assessor rating.

(6)

Explain, with reference to the consumer file, the reasons for the rating and any actions taken to obtain missing information.

5.2

G

The overall assessment part of the Information Section has 2 boxes:

(1)

Tool rating: the BSPS DBAAT’s indicative rating of whether the firm has obtained the ‘necessary information’ to make a personal recommendation based on the answers to Information Area questions 1 to 9 in the Information Section.

(2)

Assessor rating: this is the assessor’s own informed assessment in the round of whether the firm has obtained the necessary information to make a personal recommendation. The assessor can come to a different rating.

5.3

R

To complete the overall assessment of whether the firm has collected the necessary information at 5.1R(4), take the following steps. Using the available evidence and with reference to the information requirements:

(1)

review the information recorded and the ratings in each Information Area of the BSPS DBAAT;

(2)

answer ‘yes’ or ‘no’ depending on whether the firm has complied with the information requirements; and

(3)

insert commentary on whether or not the firm has complied with the information requirements.

5.4

R

If the answer to all of the Information Area questions 1 to 9 is ‘yes’, select ‘compliant – proceed to suitability section’ and proceed to the Suitability Section.

5.5

R

If one or more of the answers to the Information Area questions 1 to 9 is ‘no’, decide, with reference to the information requirements, whether there is nonetheless sufficient information to assess the suitability of the recommendation and:

(1)

if there is sufficient information, select ‘non-compliant however enough information to assess suitability’ and make a record of the reasons for the assessment in accordance with CONRED 4 Annex 21R 5.3(3)R; or

(2)

if there is not sufficient information, select ‘Non-compliant - Material Information Gap’ and take the second step at CONRED 4.3.5R to obtain the missing information then proceed to 5.1R(2).

5.6

G

There may be sufficient information to assess the suitability of the advice in circumstances where the firm has been unable to obtain the necessary information in one or more Information Area. For example:

(1)

where the consumer was in serious financial difficulty and had a proven urgent need for the transferred funds and the firm was unable to obtain the necessary information in Information Area 1, 3, 4 or 5. The types of circumstances in which a consumer is likely to be able to show they are experiencing serious financial difficulty include where continuing to pay domestic bills and credit commitments is a heavy burden on the consumer and the consumer has missed payments for any credit commitments and/or any domestic bills in any 3 or more of the last 6 months; or

(2)

where the consumer was in ill health, with death expected imminently, and wanted to transfer in order to pass the value of their pension benefits to beneficiaries and the firm was unable to obtain the necessary information in Information Area 3, 4, 5, or 6.

5.7

R

If, after taking the steps at CONRED 4.3.5R, and having regard to the guidance in CONRED 4.3.12G to CONRED 4.3.13G, the conclusion is that the firm has not obtained the necessary information and it is not possible to assess the suitability of the transfer (such that the ‘assessor rating’ is ‘Non-compliant – Material Information Gap’), record:

(1)

a brief summary of the missing information and its significance to the suitability assessment (for example, ‘the firm has not recorded any consumer objectives and so it cannot form a view on whether the transfer meets the consumer’s investment objectives’); and

(2)

that the firm has not complied with the information requirements but it is not possible to assess whether the firm has complied with the suitability requirements; and

(3)

where the failure relates to the transfer analysis, that the firm has not carried out the required transfer analysis in accordance with COBS 19.1.2R.

6

Instructions for Information Areas

6.1

G

This section sets out how to assess whether the firm has collected the necessary information across 9 Information Areas to make a personal recommendation. It is also to be used to determine whether the assessor has sufficient information to assess suitability.

Information Area 1: has the firm obtained the essential facts about the consumer?

6.2

R

Refer to the available evidence and take the following steps:

(1)

Select ‘yes’ or ‘no’ depending on whether the firm has obtained the essential facts about the consumer.

(2)

Enter the information about the consumer and (if relevant) their spouse or partner from the available evidence.

(3)

Record any information inferred from the available evidence in the comment box.

6.3

R

Complete the BSPS DBAAT as follows:

(1)

Where advice is on a joint life basis, complete the essential information for the consumer and their partner.

(2)

If the consumer’s tax rate is not recorded, it can be inferred from the consumer’s salary at the date of the advice.

(3)

Record in the additional comments box whether the consumer intends to transfer the pension to a Qualifying Recognised Overseas Pension Scheme. Record the relevant currency and overseas tax rates.

(4)

Where health status is not recorded, absent any evidence suggesting otherwise, infer that the consumer is in good health.

(5)

Record details about any dependants and the consumer’s responsibility for them.

(6)

Include details about whether the consumer had characteristics of vulnerability. This means someone who, due to their personal circumstances, is especially susceptible to detriment.

Information Area 2: has the firm obtained the necessary information regarding the consumer’s objectives?

6.4

R

Take the following steps to complete this area. Using the available evidence, identify the information recorded on the consumer’s objectives and:

(1)

if no objectives have been recorded, answer ‘no’ to this question; or

(2)

if objectives are recorded, answer ‘yes’; and

(3)

complete the BSPS DBAAT by recording the consumer’s objectives, using the same wording and ranking or prioritisation as the firm and include any observations in the additional comments box.

6.5

G

For each objective identified, the BSPS DBAAT will indicate fields where further information can be recorded, in the right-hand columns, relating to:

(1)

the amount wanted (to achieve the objective); and

(2)

the date the amount is needed.

Information Area 3: has the firm obtained the necessary information regarding the consumer’s preferences regarding risk taking and their risk profile?

6.6

R

Take the following steps to complete this area. Using the available evidence:

(1)

select ‘yes’ or ‘no’ depending on whether the firm has obtained the necessary information about the consumer’s preferences regarding risk taking and their risk profile;

(2)

record in the boxes provided the firm’s description of the consumer’s:

(a)

attitude to investment risk;

(b)

attitude to the risks associated with a pension transfer, including the loss of safeguarded benefits;

(c)

capacity for loss (in general); and

(d)

capacity for loss of safeguarded benefits;

(3)

select ‘yes’ or ‘no’ depending on whether the firm used a tool for any of the above assessments. If the firm used a tool record the name of that tool in the ‘name of tool’ box; and

(4)

record in the ‘comments’ box any additional comments or observations on the firm’s approach to obtaining this information.

6.7

G

‘Capacity for loss’ refers to the consumer’s ability to absorb falls in the value of their investment. If any loss of capital would have a materially detrimental effect on their standard of living, this should be taken into account in assessing the risk that they are able to take.

6.8

G

COBS 9.2.2R(2) requires a firm to obtain, where relevant, information about the consumer’s (a) preferences regarding risk taking and (b) risk profile. COBS 19.1.7G and COBS 19.1.7AG contain guidance to which a firm giving pension transfer advice should have had regard when identifying the consumer’s risk preferences and risk profile.

6.9

G

A firm advising a consumer during the relevant period should have obtained sufficient information to enable it to consider the consumer’s attitude to the investment risks specific to a pension transfer, including:

(1)

the rate of growth that would have to be achieved to replicate scheme benefits in the proposed arrangement (COBS 19.1.7G and COBS 19.1.7AG);

(2)

the extent to which benefits may fall short of replicating those in the defined benefits pension scheme or other scheme with safeguarded benefits (COBS 19.1.7AG(1));

(3)

the uncertainty of the level of benefit that can be obtained from the purchase of a future pension annuity and the investment risk to which the retail consumer is exposed until a pension annuity is purchased with the proceeds of the proposed personal pension scheme or stakeholder pension scheme (COBS 19.1.7AG(2));

(4)

the potential lack of availability of pension annuity types (for instance, pension annuity increases linked to different indices) to replicate the benefits being given up in the defined benefits pension scheme as set out in COBS 19.1.7AG(1)); and

(5)

the risks relevant to a pension transfer from the BSPS to a scheme with flexible benefits listed at CONRED 4 Annex 22G at Table 1.

Information Area 4: has the firm obtained the necessary information regarding the consumer’s knowledge and experience?

6.10

R

Take the following steps to complete this area. Using the available evidence:

(1)

identify the information relevant to the consumer’s knowledge and experience of defined benefits pension schemes and pension schemes with flexible benefits, including:

(a)

the types of service, transaction and investments with which the consumer is familiar;

(b)

the nature, volume and frequency of the consumer’s transactions in investments and the period over which they have been carried out; and

(c)

the level of education, profession or relevant former profession of the consumer;

(2)

answer ‘yes’ or ‘no’ depending on whether the firm has obtained the necessary information about the consumer’s knowledge and experience; and

(3)

record the consumer’s knowledge and experience relevant to pension transfers in the ‘additional comments’ box.

Information Area 5: has the firm obtained the necessary information regarding the consumer’s estimated expenditure?

6.11

R

Take the following steps to complete this area. Using the available evidence:

(1)

identify the information relevant to the consumer’s financial situation;

(2)

answer ‘yes’ or ‘no’ depending on whether the firm has obtained the necessary information regarding the consumer’s estimated expenditure;

(3)

record relevant information under the headings ‘current regular’ and ‘retirement regular’, including the consumer’s expenditure on:

(a)

basic cost of living;

(b)

lifestyle expenditure; and

(c)

discretionary expenditure/savings; and

(4)

record any additional comments about the steps the firm has taken to obtain this information, including any inferences made about current or retirement regular expenditure.

6.12

E

Answer ‘yes’ to the question at 6.11R(2) if the firm has taken reasonable steps to obtain the information under the headings ‘current regular’ and ‘retirement regular expenditure’ but there is information missing and:

(1)

the consumer is 5 years or less from their intended retirement age and taking account their personal circumstances, it is possible to use the current regular expenditure as a proxy for retirement regular expenditure; or

(2)

it is possible to use the current regular expenditure, with consumer-specific adjustments, as a proxy for retirement regular expenditure.

6.13

G

The BSPS DBAAT records the necessary information about the consumer’s estimated expenditure throughout retirement in 3 categories:

(1)

Basic cost of living: this includes all non-discretionary expenditure. For example, utility bills, council tax, food and any outstanding accommodation payments (such as mortgages and rents) or care expenses if these are ongoing.

(2)

Lifestyle expenditure: this is expenditure to support the consumer’s lifestyle. For example, consumers may wish to spend money on entertainment, holidays or home help.

(3)

Discretionary expenditure/savings: this is expenditure which is discretionary and could easily be cut back by the consumer at any time. It may include current savings into pensions or investments which may well cease upon retirement. This may also be labelled as ‘disposable income’.

6.14

G

If the firm has estimated the consumer’s expenditure in retirement, consider whether it took reasonable steps to do so. Reasonable steps might include:

(1)

gathering the necessary information on the consumer’s current level of expenditure and liabilities;

(2)

considering how the consumer’s personal circumstances and lifestyle (for example, living arrangements, mortgage position, provision of financial support for dependents, recreational activities, and travel) are likely to change upon retirement, and how this might affect future expenditure and liabilities;

(3)

challenging low estimates of expenditure by using comparative figures derived from (for example) the firm’s experience with other consumers in similar situations, statistical averages, actuarial data and other reliable sources (though it is unlikely that the use of generic data would by itself satisfy the requirement to take reasonable steps);

(4)

where a firm has used a cashflow modelling tool to estimate the consumer’s level of expenditure in retirement as part of demonstrating how reliant the consumer is on this income in retirement;

(5)

challenging inconsistent information, for example, where the consumer suggests they have a high level of available disposable income but low levels of savings, suggesting that their lifestyle expenditure may be more than they represent.

Information Area 6: has the firm obtained the necessary information regarding the consumer’s financial situation?

6.15

R

To complete this area, take the following steps. Using the available evidence:

(1)

identify the information relevant to the consumer’s financial situation;

(2)

answer ‘yes’ or ‘no’ depending on whether the firm has captured the necessary information regarding the consumer’s financial situation; and

(3)

record the relevant information for the consumer and (for joint advice) their spouse or partner under the headings:

(a)

consumer’s current income;

(b)

income sources in retirement (excluding income from the comparator scheme, which is captured in Information Area 7);

(c)

other assets (excluding the consumer’s main residence); and

(d)

liabilities.

6.16

G

The consumer’s main residence should not usually be counted as an asset which can be used as an income source in retirement. The consumer’s main residence typically provides secure accommodation throughout retirement. Where the firm has a reasonable basis for treating the main residence as an asset, for example because the consumer has a legitimate plan to downsize and the firm has a contemporaneous record of these plans, include the value of the main residence in the ‘other assets’ box.

6.17

G

If the consumer file is incomplete or it is unclear whether the firm has collected the necessary information on the consumer’s financial situation, it may be possible to estimate the consumer’s income or assets from other information on the consumer file. For example:

(1)

if the ‘other assets’ section in a fact-find is blank, and there is evidence that the consumer’s income does not exceed or marginally exceeds their expenditure, it may be reasonable to assume that the consumer has no other assets;

(2)

if the ‘state pension’ section of the fact-find is blank:

(a)

where there is evidence of the consumer’s employment history on file or length of service at the scheme employer, it may be possible to estimate entitlement to a state pension;

(b)

where a consumer expects to continue in employment until retirement, it is reasonable to infer, unless there is specific information to the contrary, that the consumer would continue to accrue state pension entitlement throughout that period;

(3)

if details on the ‘spouse’s/partner’s’ assets are missing, it may be possible to infer information based on the spouse’s circumstances. For example:

(a)

if the spouse or partner was employed at the time of the advice, it is likely they will have some eligibility for state pension;

(b)

if the spouse or partner was not employed, this may indicate that they have modest assets, in the absence of evidence suggesting otherwise;

(4)

if the consumer or their spouse or partner held other defined benefits of material value, where a benefits statement was delayed, these benefits could be reasonably estimated by contemporaneous records of their salary, length of service and publicly available scheme details;

(5)

if there is an indication that the spouse or partner has a defined contribution pension scheme or other assets but the value is not quantified, where it has already been demonstrated that the consumer and spouse or partner have sufficient other guaranteed pension provision to cover their expenditure in retirement, the value of this scheme may not be necessary to assess the suitability of the recommendation to transfer.

6.18

G

(1)

If the available evidence suggests that the consumer has a significant amount of disposable income, but the firm has obtained limited or no information on them, it is more likely than not that the firm has not obtained the necessary information.

(2)

If the available evidence demonstrates that the consumer has other assets or liabilities, but the firm has obtained limited or no information on them, it is likely that the firm has not obtained the necessary information.

6.19

G

If the consumer was concerned about the security of their employment with Tata Steel Ltd and the security of income over the remaining term to retirement, this should have been recorded on the consumer file. The firm should have inquired as to whether redundancy or loss of income was imminent and was likely to cause significant financial hardship.

Information Area 7: has the firm obtained the necessary information regarding the consumer’s pension benefits?

6.20

R

To complete this area, take the following steps. Using the available evidence:

(1)

(where the firm has advised on multiple periods of service in the BSPS) record under the heading ‘number of schemes’:

(a)

the number of periods of service in the BSPS advised on;

(b)

whether the outcome was to transfer all periods of service;

(2)

record the relevant information for the consumer’s BSPS membership, including:

(a)

the statement of benefits and date obtained;

(b)

whether the Time to Choose pack was obtained;

(c)

what the consumer’s Time to Choose election was (BSPS2 or PPF);

(d)

the date of the CETV and the CETV amount;

(e)

the dates they joined and left the BSPS (the BSPS DBAAT will then automatically calculate the length of service);

(f)

their retirement date (NRD) in the BSPS;

(g)

BSPS minimum retirement age;

(h)

whether the client opted out of the scheme in advance of its closure and the date of any opt-out;

(i)

any additional comments;

(3)

answer ‘yes’ or ‘no’ depending on whether the firm has captured the necessary information regarding the consumer’s BSPS membership, Time to Choose election, and benefits; and

(4)

record any comments relevant to the consumer’s CETV and the comparator scheme(s) in the ‘additional comments’ box.

Information Area 8: has the firm obtained the necessary information regarding the proposed arrangement?

6.21

R

To complete this area, take the following steps. Using the available evidence:

(1)

identify information about the proposed arrangement;

(2)

answer ‘yes’ or ‘no’ depending on whether the firm has captured the necessary information regarding the proposed arrangement;

(3)

if the firm has not identified a proposed arrangement, answer ‘no’ to this question;

(4)

record the relevant information under the headings ‘proposed arrangement’; and

(5)

in the ‘additional comments’ box, record any relevant information about product and adviser costs and charges.

Information Area 9: has the firm carried out the transfer analysis?

6.22

R

To complete this area, take the following steps. For the relevant comparator scheme(s), using the available evidence and with reference to the firm’s transfer value analysis:

(1)

record the consumer’s preferred retirement age;

(2)

record the relevant comparator schemes(s);

(3)

record relevant information under the heading ‘comparison of benefits’ from the comparison carried out by the firm to comply with COBS 19.1.2R; and

(4)

record relevant information under the heading ‘critical yield’, including:

(a)

the critical yield on a joint and single basis to the consumer’s NRD and preferred retirement date; and

(b)

identify which critical yield is more relevant (joint or single) by selecting the critical yield which corresponds to the consumer’s intentions; and

(i)

if the evidence on file demonstrates that the consumer does not intend to take any pension commencement lump sum, record the critical yield for a full pension and make a note in the ‘additional comments’ box; and/or

(ii)

if the consumer is single and there is nothing on file to suggest that this is likely to change, then insert the critical yield calculated on a single life basis and make a note in the ‘additional comments’ box; and

(c)

record the critical yield to match the comparator scheme(s) at the consumer’s preferred retirement date; and

(5)

record commentary on any other comparison of benefits, for example on cashflow modelling or analysis of how long funds are likely to last in the proposed arrangement.

6.23

G

The BSPS DBAAT records the necessary information about the consumer’s benefits at the comparator scheme(s) and their preferred retirement date in 3 categories:

(1)

Pension (no commutation) per annum (p.a.): the income benefits the consumer would receive at NRD if they were to take all their benefits as income only.

(2)

Pension (full commutation) per annum (p.a.): the (reduced) income benefits the consumer would receive at NRD if they chose to maximise their pension commencement lump sum by commuting income benefits up to the full permitted limit.

(3)

Pension commencement lump sum (PCLS): the lump sum benefits the consumer would receive at their NRD if they chose to maximise their PCLS by commuting income benefits up to the full permitted limit.

6.24

G

To assess whether the firm has carried out the transfer analysis, identify whether:

(1)

(with reference to the assumptions in COBS 19.1.4R to COBS 19.1.4BR and taking into account the dates these rules were in force) the analysis has been undertaken on the correct assumptions, including whether, if more cautious assumptions have been used, those assumptions are reasonable; and

(2)

the analysis is consistent with product-related documents such as the key features illustration.

7

Suitability requirements

7.1

R

The following requirements are specified as ‘suitability requirements’:

(1)

COBS 9.2.1R(1), which requires a firm to take reasonable steps to ensure that a personal recommendation is suitable for its client; and

(2)

the common law duty in contract or tort to exercise reasonable skill and care in advising the consumer on pension transfers.

7.2

G

The contract between the firm and the consumer may have included a specific term providing that the firm would exercise reasonable skill and care in advising the consumer on investments. If it did not do so, such a duty is likely to have been implied into the contract.

7.3

G

The standard of care under the FCA rules and the common law is that of a reasonably competent firm carrying on a similar business to that of the firm assessed.

7.4

G

The suitability requirements arise from FCA rules and the common law. For the requirements specified, the standards required of the firm are materially similar, regardless of whether their origin is a rule or the common law.

7.5

G

COBS 9.2.1R(2), COBS 9.2.2R and COBS 9.2.3R indicate matters of which a firm must take account when assessing whether the firm failed to comply with the suitability requirements. In summary, these are the consumer’s:

(1)

investment objectives;

(2)

financial situation; and

(3)

knowledge and experience in the investment field relevant to the specific type of designated investment or service.

7.6

G

The starting point for pension transfer advice is the guidance in COBS 19.1.6G that a firm should only consider a transfer, conversion or opt-out to be suitable if it can clearly demonstrate, on contemporary evidence, that the transfer, conversion or opt-out is in the client’s best interests.

8

Assessing scheme cases for compliance with suitability requirements

8.1

R

(1)

The ‘Suitability Section’ in the BSPS DBAAT and associated additional provisions in these instructions contain ‘examples’ which tend to show failure to comply or compliance with the suitability requirements specified at 7.1R.

(2)

The examples are indicators that advice may be unsuitable, and an overall view of suitability or unsuitability must be reached taking account of all of the circumstances.

8.2

R

For each scheme case, the assessor must:

(1)

fairly consider and give appropriate weight to all available evidence of the firm’s compliance or non-compliance with applicable suitability requirements; and

(2)

decide, including with reference to the examples in the BSPS DBAAT, whether it is more likely than not that the firm complied or failed to comply with the suitability requirements.

8.3

R

In considering the available evidence, the assessor must:

(1)

not assume that a firm complied with a suitability requirement solely on the basis that:

(a)

the consumer signed documentation that records their understanding or agreement to matters set out in that documentation;

(b)

the advice was given to a consumer who had transferred from a defined benefit occupational pension scheme in the past;

(2)

give more weight to evidence of the consumer’s particular circumstances or the circumstances at the time than to general evidence of the selling practices of the firm or its advisers at the relevant time;

(3)

determine that an example is present on the ‘balance of probabilities’ when it is more likely than not to have occurred.

8.4

R

When assessing whether a firm complied with the suitability requirements, the assessor must take into account the following:

(1)

the consumer’s investment objectives, including their willingness to bear the risks associated with transfer (transfer risk);

(2)

the consumer’s financial situation, including their ability, financially, to bear the risks associated with the recommended transfer consistent with their investment objectives;

(3)

the consumer’s ability, in the light of the following, to understand the risks associated with a pension transfer:

(a)

the experience and knowledge of the consumer relevant to a pension transfer; and

(b)

any communications received from the comparator scheme(s) regarding the pension transfer.

8.5

R

When assessing the reasonableness of a firm’s conduct, the assessor must:

(1)

assess the firm’s conduct against what was reasonable at the time when the firm gave the advice; and

(2)

have regard to the information available at various times, including the information listed at Table 3 of CONRED 4 Annex 22G; and

(3)

conclude that the conduct of the firm assessed was reasonable only where that firm displayed the degree of skill, care and diligence that would at that time have been exercised in the ordinary and proper course of a similar business to that of the firm.

8.6

G

Where the advice is given using a two-adviser model and the advisers are employed by different firms:

(1)

identify which firm is responsible for the pension transfer advice and which firm is responsible for the investment advice;

(2)

take into account that it will generally be reasonable for the firm providing pension transfer advice to rely on information provided to it in writing by the firm providing investment advice, unless it is aware or ought reasonably to be aware of any fact that would give reasonable grounds to question the accuracy of that information (COBS 2.4.6R and COBS 2.4.8G).

9

Completing the Suitability Section of the BSPS DBAAT

9.1

G

The Suitability Section is used to record the assessment of whether the firm has complied with the suitability requirements.

9.2

R

The assessor must take the following steps to complete the Suitability Section:

(1)

review the available evidence and the information recorded in the Information Section of the BSPS DBAAT;

(2)

take the steps in Section 10 of this Annex to determine whether the available evidence shows overall that an example is present, or not;

(3)

indicate whether any or all of Examples (1) to (12) are present, or not, by selecting ‘yes’ or ‘no’;

(4)

conclude, taking into account all of the available evidence and the presence of any examples indicating unsuitable advice, whether the firm complied with the suitability requirements; and

(5)

comment on whether or not the firm complied with the suitability requirements, with reference to the example or examples that support their conclusion.

9.3

G

If an example is present, this will tend to indicate the firm’s potential non-compliance with the suitability requirements. There may be other factors which mean that the firm has, despite the presence of the example, complied, or not complied, with the suitability requirements. For example:

(1)

if Example 9 is present because the transfer analysis does not support a recommendation to transfer, but the recommendation is nonetheless suitable because the consumer has little or no reliance on the transfer value from the comparator scheme and no requirement to replicate the amount or shape of the comparator scheme benefits; or

(2)

if Example 1 is present but the recommendation is nonetheless suitable because the consumer is in serious ill health with a shortened life expectancy and:

(a)

the consumer’s objective is to transfer to preserve the value of their scheme benefits for beneficiaries; and

(b)

the beneficiaries would be financially better off if the funds were transferred to a scheme with flexible benefits rather than remaining in the comparator scheme(s).

9.4

G

The BSPS DBAAT rating will indicate a conclusion of ‘Compliant’ or ‘Non-Compliant’ based on the answer to the example questions in the BSPS DBAAT. The BSPS DBAAT rating is not definitive of suitability; it is an indication of the firm’s compliance with the suitability requirements.

10

Examples that indicate unsuitable advice

10.1

G

This section contains rules, evidential provisions, and guidance for determining whether the available evidence shows overall that an example is present, or not.

Example 1: the consumer is, or will be, reliant on income from the comparator scheme

10.2

R

Take the following steps to determine whether this example is present:

(1)

Review the available evidence in Information Areas 5, 6, 7, 8 and 9 of the Information Section.

(2)

Using the available evidence, identify the amount the consumer needs to meet anticipated expenses and personal outlays throughout retirement, taking into account:

(a)

any forecast expenditure plans that the firm has identified with the consumer;

(b)

any intention or preference for early retirement;

(c)

any existing liabilities that the consumer continues to pay off (for example, their mortgage) and their plans for clearing these debts;

(d)

whether the forecast expenditure appears reasonable in light of their current expenditure patterns and plans to pay off liabilities; and

(e)

where the firm has not collected a forecast expenditure plan, an estimate (if possible) of the consumer’s likely expenditure patterns based on the information on file.

(3)

Using the available evidence, identify the anticipated income from the comparator scheme at NRD or the consumer’s preferred retirement date, whichever is earlier. Where the consumer wishes to retire early, assess whether the consumer can afford to retire early or whether this will give rise to or increase the risk of the consumer running out of income in retirement.

(4)

Assess how the income from the comparator scheme, including inflationary increases, contributes to the consumer’s income needs in (2).

(5)

Assess whether the consumer can produce the same or similar contribution towards their planned expenditure needs throughout retirement (using a range of possible life expectancies) as identified in (2) using the available assets, including from:

(a)

contribution-based pension schemes, including the proposed arrangement, taking into account the impact of the following factors on the sustainability of these schemes throughout retirement:

(i)

the frequency of withdrawals (ad hoc or regular payments);

(ii)

the timing of withdrawals (monthly, yearly);

(iii)

the amount of the withdrawals; and

(iv)

investment performance;

(b)

savings and investments;

(c)

other pension schemes with safeguarded benefits;

(d)

(if the consumer is eligible) state pension;

(e)

(if the consumer is managing income on a joint basis) the spouse’s/partner’s other assets, pensions and entitlement to the state pension, and how this contributes to their total household income.

(6)

Using the assessments in 10.2R(4)-(5) decide (yes or no) whether:

(a)

the consumer can produce the same or similar contribution towards their income needs, as identified in 10.2R(2), from the proposed arrangement; and

(b)

the consumer has the requisite capacity for loss, taking into account the impact of the factors considered at 10.2R(5)(a) on the sustainability of the proposed arrangement.

10.3

E

(1)

If the answer to 10.2R(6)(a) and (b) is ‘yes’, conclude that the consumer is not likely to be reliant on income from the comparator scheme.

(2)

If the answer to either 10.2(6)(a) or (b) is ‘no’, conclude that the consumer is likely to be reliant on income from the comparator scheme.

(3)

If the firm has not obtained the necessary information in all of the Information Areas 5, 6 and 7 of the Information Section and so it is not possible to carry out the steps in 10.2R(1) to (6), conclude that the firm has not demonstrated that it has a reasonable basis for believing that the consumer is able to bear the risk of the pension transfer to achieve their objective.

Example 2: the aim of the transfer is to pass the value of the pension to beneficiaries on the member’s death, but the firm has not demonstrated that the consumer can bear the risk of the transfer that would be needed to achieve this objective

10.4

R

Refer to Information Area 2 of the Information Section:

(1)

if the consumer has a priority objective to pass the value of the pension to beneficiaries on their death, take the steps in 10.5R; or

(2)

if the consumer does not have this priority objective answer ‘no’ to this question and proceed to Example 3.

10.5

R

Take the following steps to determine whether this example is present:

(1)

Review the available evidence in Information Areas 2, 5, 6 and 7 of the Information Section.

(2)

Refer to Tables 1 and 2 in CONRED 4 Annex 22G and the available evidence to identify what death benefits were likely to be available for beneficiaries on the member’s death:

(a)

(in all cases) in the proposed arrangement having regard to the way the consumer is likely to access their pension scheme throughout retirement; and

(b)

in the comparator scheme.

(3)

Identify whether there was an alternative way to meet the consumer’s objective without giving up comparator scheme benefits, including:

(a)

level term assurance for the required sum; or

(b)

decreasing term assurance for an appropriate term; or

(c)

using available death in service cover.

(4)

Decide whether the firm has a reasonable basis for believing that:

(a)

the recommendation to transfer in order to pass the value of the pension to beneficiaries on the member’s death meets the consumer’s investment objectives; and

(b)

the consumer is able financially to bear any transfer-related risks consistent with their investment objectives.

10.6

E

Answer ‘yes’ to this question when the available evidence demonstrates that:

(1)

the consumer did not have the requisite capacity for loss because they were not able to forego comparator scheme benefits to achieve this objective; and/or

(2)

a lower risk suitable alternative was available to achieve this objective; and/or

(3)

it was likely that the consumer would exhaust their pension savings during their lifetime (having regard to how the consumer will access their pension savings and the factors listed at 10.2R(5) above) and so there will be minimal death benefits available; and/or

(4)

the firm has not obtained the necessary information in both of the Information Areas 5 and 6 of the Information Section and so it is not possible to complete the assessment in 10.4R because the firm has not demonstrated that it has a reasonable basis for believing that the consumer is able to bear the risk of the pension transfer to achieve this objective; and/or

(5)

the firm has not obtained the necessary information in Area 2 of the Information Section and so it is not possible to understand the consumer’s rationale for pursuing this objective.

Example 3: the aim of the transfer is to access income-related benefits flexibly but the firm has not demonstrated that the consumer can bear the risk of the transfer that would be needed to achieve this objective

10.7

R

Refer to the available evidence in Information Area 2 of the Information Section:

(1)

if the consumer has a priority objective to access income-related benefits flexibly or to take control of their benefits, take the steps in 10.8R; or

(2)

if the consumer does not have this priority objective, answer ‘no’ to this question and proceed to Example 4.

10.8

R

Take the following steps to determine whether this example is present:

(1)

Review the available evidence in Information Areas 2, 5 and 6 of the Information Section.

(2)

Identify why the consumer requires flexible access to or control over their income-related benefits and how the features of the proposed arrangement meet their objective(s).

(3)

Identify whether any alternatives are available to meet the consumer’s objective.

(4)

Decide whether the firm has a reasonable basis for believing that the recommendation to transfer to access income-related benefits flexibly:

(a)

meets the consumer’s investment objectives; and

(b)

the consumer is able financially to bear any related risks consistent with their investment objectives.

10.9

E

Answer ‘yes’ to this question when the available evidence demonstrates that:

(1)

the consumer does not have the requisite capacity for loss because they were not able to forego scheme benefits to achieve this objective; and/or

(2)

there is an alternative way for the consumer to meet their objectives using other assets instead of transferring their BSPS scheme; and/or

(3)

the firm has not collected the necessary information in both of the Information Areas 5 and 6 of the Information Section and so it is not possible to complete the assessment in 10.8R because the firm has not demonstrated that it has a reasonable basis for believing that the consumer is able to bear the risk of the pension transfer to achieve this objective; and/or

(4)

the firm has not collected the necessary information in Information Area 2 of the Information Section and so it is not possible to understand the consumer’s rationale for pursing this objective.

10.10

G

(1)

The objective may be recorded as ‘flexibility’ or ‘control’ without further explanation. It is up to the firm to demonstrate what is meant by ‘flexibility’ or ‘control’ with reference to the consumer’s circumstances and how the recommendation meets the consumer’s objectives and is suitable for their financial situation. The following examples may demonstrate a need for flexibility:

(a)

if the consumer wishes to retire early and would like to access a higher amount of income in the short term in order to bridge an income gap until other guaranteed income commences, such as state pension;

(b)

if the consumer is in serious financial difficulty or facing financial hardship and needs to pay off or reduce debt prior to its planned redemption date, and the pension commencement lump sum from the comparator scheme(s) would be insufficient to meet this objective. The types of circumstances in which a consumer is likely to be able to show they are experiencing serious financial difficulty include where continuing to pay domestic bills and credit commitments is a heavy burden on the consumer and the consumer has missed payments for any credit commitments and/or any domestic bills in any 3 or more of the last 6 calendar months;

(c)

the consumer intends to reduce their working hours or take alternative work which may produce a lower income, prior to retiring fully, and it can be demonstrated that the transfer value is of sufficient value to support this objective without the risk of running out of money in the consumer’s lifetime.

(2)

A consumer may have a strong desire to transfer to obtain flexibility and control where they have real or perceived concerns regarding the financial viability in the scheme. The circumstances of the BSPS restructuring may have encouraged a greater than usual proportion of members to seriously consider the option of transferring out, which may in turn have led to an increased occurrence of consumers expressing a strong desire to transfer. However, this does not absolve the firm from its responsibility to only recommend a transfer if it can demonstrate that it is suitable.

Example 4: the aim of the transfer is to maximise PCLS but the firm has not demonstrated that the consumer can bear the risk of the transfer that would be needed to achieve this objective

10.11

R

Refer to the available evidence in Information Area 2 of the Information Section:

(1)

if the consumer has a priority objective(s) to maximise their pension commencement lump sum (PCLS), take the steps in 10.12R; or

(2)

if the consumer does not have this priority objective, answer ‘no’ to this question and proceed to Example 5.

10.12

R

Take the following steps to determine whether this example is present:

(1)

Refer to the available evidence in Information Areas 2, 5 and 6 of the Information Section on the consumer’s objectives and financial situation.

(2)

Identify the PCLS option in the relevant comparator scheme(s).

(3)

Identify why the consumer wants to access their PCLS.

(4)

Identify whether the consumer needs to transfer to the proposed arrangement to access their PCLS or could have used:

(a)

the PCLS from the comparator scheme; or

(b)

other assets to create a lump sum without transferring the pension.

(5)

Identify the impact taking their PCLS may have on the level of other benefits which the consumer may obtain from the comparator scheme.

10.13

E

Answer ‘yes’ to this question when the available evidence demonstrates that:

(1)

the consumer did not have the requisite capacity for loss because they were not able to forego scheme benefits to achieve this objective; and/or

(2)

there was an alternative way for the consumer to access income-related benefits flexibly without transferring their pension benefits; and/or

(3)

Example (1) is present and taking higher PCLS makes it likely that the consumer would exhaust their pension savings during their lifetime (having regard to how the consumer will access their pension savings and the factors listed at 10.2R(5) above); and/or

(4)

the firm has not collected the necessary information in both of the Information Areas 5 and 6 of the Information Section and so it is not possible to complete the assessment in 10.11R because the firm has not demonstrated that it has a reasonable basis for believing that the consumer is able to bear the risk of the pension transfer to achieve their objective; and/or

(5)

the firm has not obtained the necessary information in Information Area 2 of the Information Section and so it is not possible to understand the consumer’s rationale for pursuing this objective.

10.14

G

For the purposes of 10.12R(4)(b), the firm should have considered the following alternative options, where they were available:

(1)

where the lump sum need/objective relates to paying off a debt, whether they can restructure a mortgage or other debt;

(2)

making increased contributions to a workplace pension scheme to increase the PCLS;

(3)

whether using the PCLS provision in the comparator scheme(s) will meet the consumer’s lump sum need/objective;

(4)

whether the consumer can meet their lump sum need/objective using other available funds in a scheme with flexible benefits or from other savings or investments;

(5)

taking a short-term loan.

Example 5: an aim of the transfer is to preserve or protect the value of the consumer’s pension benefits but the comparator scheme(s) benefits would meet the consumer’s needs

10.15

R

Refer to the available evidence in Information Area 2 of the Information Section:

(1)

if the consumer has any objective related to preserving the value of their pension benefits or protecting their benefits from the PPF, take the steps in 10.16R; or

(2)

if the consumer does not have this objective, answer ‘no’ to this question and proceed to Example 6.

10.16

R

Take the following steps to determine whether this example is present:

(1)

Refer to the available evidence in Information Areas 2, 5 and 6 of the Information Section on the consumer’s objectives and financial situation.

(2)

Identify the relevant comparator scheme(s) benefits.

(3)

Identify whether the comparator scheme(s) benefits would have met the consumer’s needs. To do this:

(a)

identify the consumer’s needs in retirement;

(b)

refer to the available evidence and Table 2 in CONRED 4 Annex 22G to identify the pension benefits the consumer would be likely to receive from the comparator scheme(s), having regard to the PPF income cap as it applied prior to 19 July 2021; and

(c)

decide whether the level of comparator scheme benefits would meet the consumer’s needs in (a).

10.17

E

(1)

Answer ‘yes’ to this question when the available evidence demonstrates that:

(a)

the level of comparator scheme benefits meets the consumer’s income needs; and/or

(b)

where Example 7 is present, the consumer wanted guaranteed income or returns and the comparator scheme met those needs; and/or

(c)

the firm has not collected the necessary information in both of the Information Areas 5 and 6 of the Information Section and so it is not possible to complete the assessment in 10.16R because the firm has not demonstrated that it had a reasonable basis for believing that the consumer was able to bear the risk of the pension transfer to achieve their objective.

(2)

Answer ‘no’ to this question where the level of comparator scheme benefits was not likely to meet the consumer’s income needs in retirement.

Example 6: the consumer wants to retire early but can meet their objective(s) in the comparator scheme(s)

10.18

R

Refer to the available evidence in Information Area 2 of the Information Section:

(1)

if the consumer has a priority objective related to accessing benefits from their pension prior to the relevant scheme NRD (an ‘early retirement objective’), take the steps in 10.19R; or

(2)

if the consumer does not have this priority objective, answer ‘no’ to this question and proceed to Example 7.

10.19

R

Take the following steps to determine whether this example is present:

(1)

Refer to the available evidence in Information Areas 2, 5 and 6 of the Information Section on the consumer’s objectives and financial situation.

(2)

Refer to the available evidence and Table 2 in CONRED 4 Annex 22G to identify what early retirement options were likely to be available and any protected retirement ages in:

(a)

the proposed arrangement; and

(b)

the comparator scheme(s).

(3)

Consider whether the consumer may have retired at a protected retirement age in the comparator scheme(s).

(4)

If (3) was not an option, identify whether there was an alternative way to meet the consumer’s objective without giving up the comparator scheme(s) benefits, including using:

(a)

other pensions (defined benefit or defined contribution);

(b)

income from part time work; and

(c)

savings, investments or other assets.

(5)

Decide whether the firm has a reasonable basis for believing that the recommendation to transfer to retire early:

(a)

meets the consumer’s investment objectives; and

(b)

the consumer is able financially to bear any risks consistent with their investment objectives.

10.20

E

Answer ‘yes’ to this question when the available evidence demonstrates that:

(1)

the consumer could have retired in the comparator scheme(s) at a protected retirement age; and/or

(2)

the consumer did not have the requisite capacity for loss because they were not able to forego comparator scheme benefits to achieve this objective; and/or

(3)

a lower risk suitable alternative was available to achieve this objective; and/or

(4)

it was likely that the consumer would exhaust their pension savings during their lifetime (having regard to how the consumer will access their pension savings and the factors listed at paragraph 10.2R(5) above) and so there will be minimal death benefits available; and/or

(5)

the firm has not collected the necessary information in both of the Information Areas 5 and 6 of the Information Section and so it is not possible to complete the assessment in 10.19R because the firm has not demonstrated that it has a reasonable basis for believing that the consumer is able to bear the risk of the pension transfer to achieve this objective; and/or

(6)

the firm has not collected the necessary information in Information Area 2 of the Information Section and so it is not possible to understand the consumer’s rationale for this objective.

Example 7: the consumer wants or prefers guaranteed income or returns

10.21

R

Refer to the available evidence in Information Areas 2 and 3 of the Information Section:

(1)

if the consumer wants or indicates a preference for guaranteed income or returns, take the steps in 10.22R; and/or

(2)

if the consumer does not have this objective, answer ‘no’ to this question and proceed to Example 8.

10.22

R

Take the following steps to determine whether this example is present:

(1)

Refer to the available evidence in Information Areas 2, 6 and 7 of the Information Section on the consumer’s objectives and financial situation.

(2)

Identify whether the proposed arrangement:

(a)

guarantees the consumer’s income or returns; or

(b)

takes into account the consumer’s preference for a guarantee and puts in place a sustainable strategy to achieve this end.

(3)

Determine whether the recommendation to transfer met the consumer’s preference for guaranteed income or returns.

10.23

E

Answer ‘yes’ to this question when the available evidence demonstrates that:

(1)

the consumer wants or has indicated a preference for guaranteed income or returns throughout retirement; and

(2)

the firm has recommended that the consumer transfer into a proposed arrangement that does not meet these needs; or

(3)

the firm has not collected the necessary information in Information Area 3 of the Information Section about the consumer’s attitude towards secure income or guarantees and so it is not possible to complete the assessment in 10.22R because the firm has not demonstrated that it has a reasonable basis for believing that the consumer has the requisite attitude to risk; or

(4)

Example 8 is present.

Example 8: the consumer does not have the necessary attitude to risk

10.24

R

Take the following steps to determine whether this example is present:

(1)

Refer to the available evidence in Information Areas 3 and 5 of the Information Section regarding the consumer’s preferences regarding risk taking and risk profile and their understanding of the risk of transfer.

(2)

Compare (a) with (b):

(a)

the consumer’s preferences regarding the risks specific to pension transfers in general, focusing on the consumer’s attitude to:

(i)

safeguarded benefits or guarantees;

(ii)

flexible benefits or the ability to control how and when they withdraw money from their pension savings;

(iii)

managing their investments or paying for someone to manage their investments on their behalf; and

(iv)

the long-term sustainability of their fund;

(b)

the risks associated with a pension transfer that the consumer must have been willing to take for a recommendation to transfer to be suitable. The relevant transfer risks are:

(i)

that their investments in the proposed arrangement will not perform as expected, and they will have less income in retirement (investment risk);

(ii)

that the withdrawals from the proposed arrangement (planned and/or ad hoc) are not sustainable and the consumer will run out of money in retirement (longevity risk);

(iii)

that inflation will erode the real value of the income they are able to draw from the proposed arrangement (inflation risk); and

(iv)

that the consumer and/or their partner may become less able to make the necessary financial decisions in relation to their income as they age (for example, due to illness or diminishing capacity).

(3)

Decide, with reference to (2)(a), whether the consumer was willing to take the risks associated with a pension transfer in (2)(b).

10.25

E

(1)

Answer ‘yes’ when the available evidence demonstrates that:

(a)

the consumer was not willing to take the risks in 10.24R(2)(a); and/or

(b)

Example 7 or 10 is present; and/or

(c)

the firm has not collected the necessary information in Information Area 3 or 4 of the Information Section and so it is not possible to complete the assessment in 10.24R(3) because the firm has not demonstrated that the recommendation meets the consumer’s objectives.

Example 9: the firm’s transfer analysis does not support a recommendation to transfer

10.26

R

Take the following steps to determine whether this example is present:

(1)

Refer to the available evidence in Information Areas 7, 8 and 9 of the Information Section, the transfer value analysis and the suitability report.

(2)

Identify the benefits and options available in the proposed arrangement.

(3)

Identify the benefits and options likely (on reasonable assumptions) to be paid in the comparator scheme(s).

(4)

Review the firm’s analysis of the effect of replacing the benefits in the comparator scheme with the benefits in the proposed arrangement, having regard to the consumer’s circumstances, including their age, marital status and, where relevant, their objectives for taking a PCLS or early retirement.

(5)

Compare (a) with (b):

(a)

the rate of return required on investments in the proposed arrangement to match the income benefits in the comparator scheme(s) that is relevant to the consumer’s circumstances and objectives:

(i)

if the consumer is single or unmarried, use the single life critical yield;

(ii)

if the consumer is taking a PCLS, use the critical yield that factors in the consumer taking the PCLS;

(iii)

if the consumer wishes to retire early, use the critical yield at the early retirement date;

(b)

the investment risk that the consumer must be willing and able to take in the proposed arrangement (taking into account a realistic rate of return) to match the desired income benefits in the comparator scheme(s).

(6)

Review how the firm says the transfer analysis supports the firm’s recommendation to transfer.

(7)

Decide whether the firm has demonstrated that the transfer analysis supports the recommendation to transfer, taking into account:

(a)

the comparison undertaken at (5); and

(b)

the analysis carried out by the firm and assessed at (4) and (6).

10.27

E

(1)

Answer ‘yes’ to this question when the available evidence demonstrates that:

(a)

the firm has not demonstrated that the transfer analysis supports the recommendation to transfer, for example because:

(i)

the critical yield indicated in the transfer value analysis is likely to be unattainable, factoring in the term to retirement and the consumer’s attitude to investment risk; or

(ii)

the capitalised value of death benefits (where this is a priority objective) is significantly higher under the comparator scheme(s) than that available from the proposed arrangement; and/or

(b)

the consumer would not have been able to match the rate of return to replicate the benefits being given up if they invested in line with their attitude to risk; and/or

(c)

Example 8 is present; and/or

(d)

Example 1 is present; and/or

(e)

the firm has not collected the necessary information in Information Area 7 or 9 of the Information Section and so it is not possible to complete the assessment in 10.26 because the firm has not demonstrated that the recommendation meets the consumer’s objectives.

Example 10: the firm did not have a reasonable basis for believing that the consumer had the necessary knowledge and experience to understand the risks involved in transferring their DB scheme

10.28

R

Take the following steps to determine whether this example is present:

(1)

Refer to the available evidence and the information recorded in Information Area 4 of the Information Section, including:

(a)

the correspondence with the consumer;

(b)

the transfer analysis; and

(c)

the suitability report.

(2)

Establish the consumer’s level of investment experience and knowledge of pension transfers, pensions and investments at the time of the advice:

(a)

in relation to defined benefit occupational pension schemes;

(b)

in relation to defined contribution schemes;

(c)

in relation to the cash equivalent transfer value offered, including any actuarial reductions;

(d)

in relation to the separate roles of the trustee and the sponsoring employer of a scheme;

(e)

in relation to the features, benefits and risks of the comparator scheme available to it at the time; and

(f)

generally, in relation to pensions and investments.

(3)

Identify the steps that the firm took to establish that the consumer could appreciate the nature of the risks they were taking with this transfer.

(4)

Identify the steps the firm took to address the consumer’s behavioural response to their situation in a balanced and rational way, including:

(a)

any misunderstandings the consumer had about the benefits available in the comparator scheme(s);

(b)

the roles of trustee and the employer where the consumer was concerned about belonging to a scheme where the employer would continue to be involved;

(c)

the level of the cash equivalent transfer value on offer, including any actuarial reductions that were being applied at the time the value was prepared;

(d)

any concerns the consumer had about the financial viability of the comparator scheme(s); and

(e)

the role of the firm and their professional duties when providing pension transfer advice.

(5)

Identify the steps that the firm took to ensure that the consumer understood the firm’s transfer analysis and its advice.

(6)

Decide whether the consumer had the necessary experience and knowledge to understand the risks involved in transferring to the proposed scheme, taking into account, in particular:

(a)

what the consumer already understood, including information such as:

(i)

information about the consumer’s existing investment and pensions portfolio and the nature, volume and frequency of the consumer’s transactions in pensions and investments;

(ii)

how long the consumer has been an investor;

(iii)

the consumer’s experience with, and knowledge of, personal, stakeholder or workplace pension schemes;

(iv)

the consumer’s experience of managing their pension or other investments or using a financial adviser to manage these investments;

(v)

the consumer’s profession (if any), including whether it is relevant to understanding defined benefit pension transfer advice and investment advice;

(vi)

whether the consumer had characteristics of vulnerability and the impact this had on the suitability of advice;

(b)

how the firm communicated the following to the consumer:

(i)

the risks of transferring the consumer’s pension and investing in a scheme with flexible benefits;

(ii)

the outcomes from the transfer analysis and whether the firm drew the attention to the factors that did, and did not, support the firm’s advice;

(iii)

the option to remain in BSPS while it entered the PPF assessment period, and the overall safety of their pension savings during this time; and

(iv)

the option to transfer to BSPS2, including the role of the trustee and the sponsoring employer and the ability to transfer out of BSPS2 at a later date;

(c)

if the consumer approached the firm for advice before 12 October 2017 and the Time to Choose period, consider:

(i)

whether the firm should have waited until more information was available about the comparator scheme(s) to provide the recommendation;

(ii)

what information the firm was able to provide the consumer with about the options in the comparator scheme(s); and

(iii)

the effect of any failure to obtain information about the comparator scheme(s) on the consumer’s understanding of their options and the risk of transfer;

(d)

what the consumer is likely to have understood after this information was provided, taking into account the overall impression that the consumer would reasonably have had of the features and risks of a transfer, particularly in the light of:

(i)

the entirety of the firm’s communications with the consumer, including communications the consumer received from the scheme trustees;

(ii)

the extent to which the firm’s communications were balanced and rational in their presentation of features and risks; and

(iii)

the consumer’s relevant experience and knowledge in (2) above.

10.29

E

Answer ‘yes’ to this question where:

(1)

the firm did not communicate in substance the risks of transferring in a way the consumer would have understood; and/or

(2)

the firm did not take reasonable steps to ensure that the consumer understood the firm’s transfer analysis, their option to transfer to a comparator scheme, and its advice; and/or

(3)

the firm did not take reasonable steps to correct any misunderstandings the consumer had in relation to the benefits available and/or the security of their benefits in the comparator schemes; and/or

(4)

the firm has not collected the necessary information in Information Area 4 of the Information Section and so it is not possible to complete the assessment in 10.28R because the firm does not have a reasonable basis for believing that the consumer has the necessary knowledge and experience to transfer.

Example 11: the consumer is under 50 and cannot bear the risks of transfer

10.30

R

(1)

Refer to the available evidence in Information Area 1 of the Information Section; and

(2)

Identify whether the consumer’s age at the time of the advice is 50 or under and:

(a)

if the consumer is under 50, take the steps in 10.31R; or

(b)

if the consumer is 50 or over, answer ‘no’ to this question and proceed to Example 12.

10.31

R

Take the following steps to determine whether this example is present:

(1)

Refer to the available evidence recorded in the Information Areas 1, 2, 3, 7 and 9 of the Information Section and to the scheme benefits available in the comparator scheme(s) (see CONRED 4 Annex 22G at Table 2).

(2)

Identify the minimum age that the consumer can draw benefits from the comparator scheme(s), including their option to take any protected retirement benefits.

(3)

Identify the objective for the transfer and:

(a)

the amount needed;

(b)

the date the amount is needed; and

(c)

why the consumer needs to transfer their comparator scheme(s) benefits now, taking into account when the consumer wants to:

(i)

release capital and/or tax-free cash from their scheme; and

(ii)

draw an income from the scheme;

(d)

the alternatives available to achieve the objective, including:

(i)

the option to remain in the scheme and wait for the outcome of the PPF assessment;

(ii)

the option to remain in the scheme and transfer into BSPS2; and

(iii)

use of other assets to achieve the consumer’s objective.

(4)

Consider the investment strategy in the proposed arrangement and whether the consumer had the requisite attitude to the risks of investment in the proposed arrangement, including inflation risk.

(5)

If the consumer approached the firm for advice before 12 October 2017 and the Time to Choose period, consider:

(a)

whether the firm should have waited until more information was available about the comparator scheme(s) to provide the recommendation;

(b)

what information the firm was able to provide the consumer with about the options in the comparator scheme(s); and

(c)

evaluate the effect of any failure to obtain information about the comparator scheme(s) on the consumer’s understanding of their options and the risk of transfer.

(6)

Decide whether the firm had a reasonable basis for believing that the consumer was able financially to bear the investment risk consistent with their investment objectives and had the knowledge and experience to transfer.

10.32

E

Answer ‘yes’ to this question when the available evidence demonstrates that:

(1)

the consumer was unable financially to bear the long-term investment risks associated with an investment in the proposed arrangement; and/or

(2)

Example 10 is present and the consumer did not have the requisite knowledge and experience to understand their options and the risk of transfer; and/or

(3)

the firm should have waited for more information to become available before it advised the consumer ahead of the Time to Choose exercise; and/or

(4)

the consumer’s objectives for the transfer, their intended retirement date, and investments were uncertain or not clearly defined and the firm’s recommendation to transfer has exposed the consumer to financial and other risks that they did not need to take with this investment.

Example 12: the recommendation to transfer is unsuitable for the consumer’s investment objectives or for their financial situation for some other reason

10.33

R

Take the following steps:

(1)

Refer to the available evidence and the information recorded in Information Areas 2, 6 and 7 of the Information Section.

(2)

Refer to the features and benefits of the comparator scheme(s) at CONRED 4 Annex 22G.

(3)

Consider whether there is any reason, other than the reasons at examples 1 to 11 above, why the recommendation to transfer was unsuitable for the consumer’s investment objectives or financial situation.

10.34

G

This example may be present when:

(1)

the transfer would result in a tax liability that the consumer is unwilling or unable to pay; and/or

(2)

the consumer could have taken an alternative course of action to meet their objectives (other than the specific objectives identified in the examples above) with less cost or less risk; and/or

(3)

the consumer has a specific objective in mind for the transfer (other than the objectives listed in Examples 2, 3, 4, 5 and 6 above), but this objective can be met without a pension transfer; and/or

(4)

the firm has recommended a transfer to mitigate against the risk of future redundancy, when there is no evidence on file that the consumer is at imminent risk of being made redundant or that redundancy was likely to cause significant financial hardship.

11

Causation Section

11.1

G

The Causation Section is used to record the assessment of whether or not the consumer’s loss was as a result of (or caused by) the firm’s failure to comply with the suitability requirements.

11.2

G

The Causation Section proceeds on an assumption that the consumer suffered a loss by transferring their BSPS to the proposed arrangement. Whether or not there was actually a loss is dealt with in the Redress Section.

11.3

R

Complete the Causation Section where the assessor has concluded that the firm has failed to comply with the suitability requirements.

11.4

R

Take the following steps to complete the Causation Section:

(1)

Review the available evidence any communications to consumers during the relevant period, including those listed in CONRED 4 Annex 22G at Table 3, and any other relevant information recorded in the Information Section and Suitability Section of the BSPS DBAAT.

(2)

Determine whether the firm’s failure to comply with the suitability requirements (‘non-compliant conduct’) caused the consumer to transfer their BSPS to the proposed arrangement (the ‘causation question’).

(3)

Answer the causation question by selecting ‘yes’ or ‘no’.

(4)

Explain the conclusion on the causation question with reference to the evidence at (1).

11.5

R

To answer the causation question, decide whether it is more likely than not that the firm’s non-compliant conduct was the effective cause of the consumer’s decision to transfer.

11.6

G

The effective cause in 11.5R above does not have to be the sole or primary cause of the consumer’s decision. In particular:

(1)

as long as the non-compliant conduct was an effective cause of the consumer’s decision, it is immaterial that other factors (for example, the influence of a third party such as an introducer) also influenced that decision;

(2)

the firm’s non-compliant conduct will not have been the effective cause of the consumer’s loss if it is more likely than not that the consumer would have transferred their BSPS to the proposed scheme in the absence of non-compliant conduct. This may occur if, for example, the firm gave an unsuitable recommendation to transfer but the consumer would still have transferred their BSPS to the proposed scheme even if the firm had complied with the suitability requirements.

11.7

G

For the purposes of the determination under 11.4R(2), have regard to the impact of the firm’s non-compliant conduct on the consumer’s decision to transfer, including:

(1)

the consumer’s demands, needs and intentions at the time of the advice, including in relation to:

(a)

the consumer’s financial situation;

(b)

any potential tax or other liabilities the consumer has;

(c)

the consumer’s objectives and future financial needs throughout retirement;

(d)

the consumer’s age and expected retirement age;

(e)

the consumer’s state of health; and

(f)

the consumer’s timeline for making any relevant decision about their BSPS in light of the BSPS restructuring;

(2)

the consumer’s knowledge and experience at the relevant time, including:

(a)

the consumer’s knowledge and experience as recorded in the Information Section;

(b)

the extent to which the consumer understood the changes to the BSPS, the operation of the PPF, and other relevant matters in the BSPS restructuring following the publication of the Regulated Apportionment Agreement, or whether the consumer would have made a decision solely or primarily on the firm’s recommendation;

(c)

the extent to which the consumer understood the detailed reasoning (if any) within the firm’s advice, or would have made a decision solely or primarily based on the firm’s recommendation overall;

(d)

the extent to which the consumer read the firm’s written advice (or would have made a decision solely or primarily based on advice given orally); and

(e)

the extent to which the consumer considered whether to take the relevant step independently of the firm’s advice.

(3)

whether the consumer had characteristics of vulnerability as recorded in the Information Section;

(4)

the relevance of surrounding circumstances, including publicly available information at the time, such as the information listed in CONRED 4 Annex 22G at Table 3, paying due regard to the reliance the consumer was reasonably likely to place on the personal recommendation of the firm as compared with generic and/or publicly available information;

(5)

the significance of any particular features of the BSPS, BSPS2, the PPF and the proposed arrangement, as regards the consumer’s specific demands, needs and intentions;

(6)

whether the consumer sought specific information from the firm and to what extent that information was provided to the consumer. If the consumer has sought specific information from the firm, then it is more likely that the information was relatively important to the consumer when making a decision as to whether to take a relevant action;

(7)

whether the consumer was informed about the particular risks and benefits of:

(a)

staying in the BSPS and moving into the PPF;

(b)

joining BSPS2; or

(c)

transferring to the proposed arrangement,

where those risks and benefits were of particular concern to the consumer (given their demands, needs and intentions);

(8)

whether a failure to provide information under (7)R above may make it more likely that the non-compliant conduct caused the consumer to take the decision they did;

(9)

the consumer’s knowledge and experience at the relevant time, including:

(a)

the consumer’s knowledge and experience as recorded in the Information Section;

(b)

the extent to which the consumer understood the changes to the BSPS, the operation of the PPF, and other relevant matters in the BSPS restructuring following the publication of the Regulated Apportionment Agreement, or whether the consumer would have made a decision solely or primarily on the firm’s recommendation;

(c)

the extent to which the consumer understood the detailed reasoning (if any) within the firm’s advice, or would have made a decision solely or primarily based on the firm’s recommendation overall;

(d)

the extent to which the consumer read the firm’s written advice (or would have made a decision solely or primarily based on advice given orally); and

(e)

the extent to which the consumer considered whether to take the relevant step independently of the firm’s advice.

12

Attestation Section

12.1

G

This section is for the senior manager at the firm to complete in compliance with CONRED 4.3.2R(3).

12.2

R

The attestation must be signed by an individual approved to perform the SMF16 (Compliance oversight) FCA controlled function for the firm or by an individual approved to perform another appropriate senior management function within the firm.

12.3

R

For the purposes of 12.2R, a notification is to be treated as signed where any of the following apply:

(1)

it contains an image of a ‘wet ink’ signature applied by the appropriate individual;

(2)

it contains an electronic signature applied by the appropriate individual; or

(3)

it contains a typed signature applied by, or with the express consent of, the appropriate individual.

13

Redress Calculation BSPS calculator instructions

13.1

R

The following definitions are used in this section:

(1)

‘assumptions’ are the economic, demographic and other assumptions to be used in the redress calculation set out at DISP App 4 Annex 1;

(2)

‘BSPS calculator’ has the meaning in CONRED 4.1.1R(3);

(3)

‘calculation date’ has the meaning in DISP App 4.1.1R(6);

(4)

‘comparator scheme’ is the scheme identified at CONRED 4 Annex 21 13.21R to 13.26R;

(5)

‘DC pension arrangement’ means any pension arrangement holding the value of the consumer’s pension benefits which originated from the BSPS, including where the arrangement has been subsequently switched to a new arrangement;

(6)

‘DOL’ is the date that the BSPS member left active service in the BSPS;

(7)

‘input’ is information entered into the BSPS calculator;

(8)

‘output’ is the report produced by the BSPS calculator setting out the redress calculation, together with a summary of the inputs and the effect of any adjustments made;

(9)

‘PPF’ includes any benefits bought out by PIC. The BSPS PPF benefit structure will be automatically mapped to PIC Scheme Benefits that are expected to be secured with PIC in 2022/2023;

(10)

‘PIC’ is the Pensions Insurance Corporation;

(11)

‘primary compensation sum’ is the amount calculated in accordance with DISP App 4.3.19R, adjusted to take account of the consumer’s tax position and any entitlement to means-tested state benefits;

(12)

‘quarter’ is the period of three months commencing 1 January, 1 April, 1 July and 1 October in each year;

(13)

‘secondary compensation sum’ is the amount comprising any consequential losses, including any initial adviser charges on the DC pension arrangement and the primary compensation sum;

(14)

‘Section’ is each former defined benefit occupational pension scheme that was merged into the BSPS over time;

(15)

‘tranche’ is an element of pension benefit which typically has a unique combination of revaluation increases before coming into payment and pension increases during payment, but may also have a unique payment starting age or payment end age; and

(16)

‘valuation date’ has the meaning in DISP App 4.1.1R(25).

Using the BSPS calculator

13.2

R

This section sets out the instructions for using the BSPS calculator. The BSPS calculator is used to calculate the redress (if any) payable to a consumer, their spouse or beneficiary in a scheme case where the firm has determined that:

(1)

the firm has failed to comply with the suitability requirements; and

(2)

the firm’s non-compliant conduct was the effective cause of the consumer’s BSPS pension transfer.

13.3

R

(1)

The BSPS calculator carries out Step 3 at DISP App 4.3.19R to 4.3.26R and the parts of Step 4 at DISP App 4.3.27R to 4.3.29R and DISP App 4.3.32.

(2)

The BSPS calculator does not calculate the redress sum that would be payable by full or partial augmentation.

13.4

R

The BSPS calculator compares the position the consumer is in with the position they would have been in if the firm had complied with the suitability requirements.

13.5

R

The BSPS calculator has a number of sections which must be completed in full except where indicated in these instructions.

13.6

R

All inputs into the BSPS calculator must be based on information obtained by the firm prior to the calculation date.

13.7

G

The BSPS calculator will only produce a redress calculation where the firm inputs the necessary information.

13.8

G

The diagram at CONRED 4 Annex 23G explains the steps to complete the redress calculation using the BSPS calculator in diagrammatic form, with reference to the relevant sections of the instructions, DISP App 4 and CONRED 4 rules.

Use of the BSPS calculator

13.9

G

The BSPS calculator and instructions in this Annex are to be used for the purpose of complying with the requirements under CONRED 4 to calculate redress owed to a BSPS member as a result of a firm’s failure to comply with the suitability requirements.

13.10

G

Nothing in the BSPS calculator affects how the FCA DBAAT or BSPS DBAAT works.

General instructions

13.11

R

A firm must carry out a separate calculation on the BSPS calculator for each period of the consumer’s service or membership of the BSPS.

13.12

R

The valuation date will be the first day of the quarter (for calculations undertaken within that quarter).

13.13

G

The redress calculation date will fall within the same quarter as the valuation date but does not have to be the same date as the valuation date.

13.14

R

The BSPS calculator will base calculations on the new assumptions available on the first day of each new quarter, using publicly available data from the final business day of the quarter immediately before.

13.15

R

(1)

Subject to DISP App 4.3.25R, redress calculations using the BSPS calculator will remain valid for 3 months from the date the redress determination is sent to the consumer, irrespective of quarterly changes to the assumptions.

(2)

If a firm carries out a further redress calculation after expiration of the validity period in (1), that calculation must be based on the new assumptions for the quarter in which it is carried out.

Steps for redress calculation

13.16

G

The BSPS calculator can be accessed on the FCA’s website from April 2023.

13.17

R

A firm must take the following steps to complete the redress calculation using the BSPS calculator:

(1)

Step 1: obtain the necessary information to calculate redress, including identifying the relevant comparator scheme by following the instructions at CONRED 4 Annex 21 13.21G to 13.26R.

(2)

Step 2: identify when the consumer would have taken retirement benefits from the comparator scheme by following Step 2 of DISP App 4.

(3)

Step 3: carry out a redress calculation by:

(a)

inputting the necessary information into the calculator, overriding default settings where appropriate, as specified in CONRED 4 Annex 21 13.30R; and

(b)

running the BSPS calculator and obtaining a calculator report.

(4)

Step 4: work out the redress offer for the redress determination in accordance with the requirements at DISP App 4.3.27R to 4.3.30R and CONRED 4.4.2R and CONRED 4.4.3R.

(5)

Step 5: send the redress determination to the consumer in accordance with the requirements at CONRED 4.4.2R, CONRED 4.4.5R and CONRED 4.4.6G.

Step 1: obtain necessary information

13.18

G

A firm should follow the steps in CONRED 4.3.14R and, where applicable, at CONRED 4.4.14R to obtain the necessary information to carry out a redress calculation using the BSPS calculator.

13.19

G

The necessary information to carry out a redress calculation using the BSPS calculator is specified at CONRED 4 Annex 21 13.30R.

13.20

R

A firm is entitled to rely on the information provided by the consumer unless it is aware that the information is out of date, inaccurate or incomplete.

Step 2: identify comparator scheme and retirement date

13.21

R

A firm must identify the appropriate comparator scheme to:

(1)

complete Step 2 in DISP App 4.3.15R to 4.3.18G; and

(2)

use for the purpose of the redress calculation.

13.22

G

Former BSPS members who did not complete a pension transfer had two options during the ‘Time to Choose exercise’ implemented by the BSPS:

(1)

move to BSPS2; or

(2)

remain in the original BSPS scheme, which would move into the PPF.

13.23

G

A firm must determine whether the evidence on the client file demonstrates that the consumer would have been more likely than not to choose the BSPS2 or the PPF.

13.24

E

Where there is evidence in a firm’s client file that a consumer selected either the BSPS2 or PPF during the Time to Choose exercise, a firm must take that choice into account in the determination required by CONRED 4 Annex 21 13.23R. The firm must also take account of any other evidence on the client file including where it may have displaced such choice and with reference to the evidential provision at CONRED 4 Annex 21 13.25R.

13.25

E

(1)

The following evidential provisions provide examples of circumstances which make it more likely than not that the consumer would have chosen the BSPS2 over the PPF:

(a)

the consumer was under 50 at the time of the advice;

(b)

the consumer could not accept a reduction in the starting pension entitlement at retirement; or

(c)

the consumer wanted to retain the option to transfer benefits in the future.

(2)

The following evidential provisions provide examples of circumstances which make it more likely than not that the consumer would have chosen the PPF over BSPS2:

(a)

the consumer needed to take the highest pension commencement lump sum available at their retirement date; and

(b)

the consumer had a considered plan for taking retirement benefits early which would have met their income needs in retirement when taking into account the PPF reduction in starting pension entitlement at retirement.

13.26

R

Where the firm is unable to determine which scheme a consumer would have been more likely than not to choose during the Time to Choose exercise, it must calculate the amount of redress using the BSPS2 as the comparator scheme.

Retirement date

13.27

R

A firm must determine the consumer’s retirement date using the rules and guidance at DISP App 4.3.15R to 4.3.18G, with the following modification: any reference to the defined benefit occupational scheme is to be replaced with a reference to the comparator scheme identified in accordance with CONRED 4 Annex 21 13.21R to 13.26R.

Step 3: carry out redress calculation

13.28

R

The third step is for the firm to carry out the redress calculation using the BSPS calculator. The BSPS calculator will calculate whether ‘X is greater than ‘Y’ on the valuation date, using the formula at DISP App 4.4.2R, where:

(1)

‘X’ is the estimated value of the benefits in the defined benefit occupational pension scheme; and

(2)

‘Y’ is the value of the benefits from the consumer’s DC pension arrangement.

13.29

R

Where ‘X’ is greater than ‘Y’, the consumer has suffered a loss and the amount calculated is the primary compensation sum to be used at Step 4.

13.30

R

A firm must input the following information into the BSPS calculator to carry out the redress calculation:

(1)

Information relevant to the consumer’s personal and financial situation including, where relevant, and overriding the default setting where different:

(a)

date of birth;

(b)

marital status;

(c)

spouse/civil partner’s date of birth;

(d)

the appropriate comparator scheme identified in accordance with CONRED 4 Annex 21 13.21R to 13.26R;

(e)

the consumer’s presumed date of retirement from the appropriate comparator scheme, identified in accordance with CONRED 4.4.3R and Step 2 of DISP App 4.3.15R to 4.3.18G;

(f)

whether the consumer is alive or deceased on or before the calculation date (default is that the consumer is still alive). If the consumer is deceased, the consumer’s date of death.

(2)

Where the comparator scheme is the BSPS (PPF) data relating to the consumer’s former benefit entitlement in the BSPS, including:

(a)

the relevant Section (the BSPS calculator will provide a list of options);

(b)

the DOL;

(c)

annual BSPS pension at DOL split by tranche, as applicable to each section. The tranches expected will be pre-populated based on the Section selected. All tranches will be optional; however, there must be one or more non-zero amounts (the BSPS calculator will provide a list of tranches by Section);

(d)

the value at DOL of the automatic lump sum entitlement due at retirement split by tranche, as applicable to each Section;

(e)

confirmation of any lower unreduced retirement age that applies to any tranches due to any enhanced early retirement provision (optional - default is Section’s retirement age will apply);

(f)

the value at DOL of any other associated benefits, for example for a bridging pension; and

(g)

details of any adjustment applicable to the transfer as part of a pension sharing order entered into (optional - default is no adjustment).

(3)

Where the comparator scheme is the BSPS2, data relating to the consumer’s former benefit entitlement in the BSPS2,including:

(a)

Section (the BSPS calculator will provide a list of Sections);

(b)

the DOL;

(c)

annual BSPS2 pension at DOL split by tranche, as applicable to each Section. The tranches expected will be pre-populated based on the Section selected. All tranches will be optional; however, there must be one or more non-zero amounts (the BSPS calculator will provide a list of tranches by Section);

(d)

the value at DOL of the automatic lump sum entitlement due at retirement split by tranche, as applicable to each Section;

(e)

confirmation of any lower unreduced retirement age that applies to any tranches due to any enhanced early retirement provision (optional - default is the BSPS2’s retirement age will apply);

(f)

the value at date of leaving of any other associated benefits, for example for a bridging pension; and

(g)

details of any adjustment applicable to the transfer as part of a pension sharing order entered into (optional - default is no adjustments apply).

(4)

Data relating to the DC pension arrangement, including:

(a)

date of transfer out of the BSPS;

(b)

value of each investment fund attributable to the original transfer value at the valuation date;

(c)

valuation date for each investment fund;

(d)

product and adviser-related percentage charges, including annual management charges;

(e)

non percentage charges in addition to the charges at (4)(d) (option - default is nil); and

(f)

whether the consumer requires initial advice in future, and whether an initial adviser charge needs to be applied.

(5)

Where the consumer has already commenced taking their pension benefits:

(a)

the amount of any pension commencement lump sum taken and dates of payment;

(b)

the amount of any funds accessed flexibly and dates of payments; and

(c)

the date of any annuity purchased and for that annuity:

(i)

its amount;

(ii)

increases (fixed, RPI linked, CPI linked, applicable cap, applicable floor);

(iii)

spouse/civil partner’s pension – proportion on death;

(iv)

the guarantee period from the commencement date (enter in years);

(v)

payment in arrears or advance and the payment frequency; and

(vi)

annuity commencement date.

(6)

An amount for any consequential losses claimed by a consumer pursuant to CONRED 4.3.14R(1)(b)(iii)(C) which the firm accepts are properly payable.

(7)

The amount at 13.34R(1) and (2) combined and adjusted to take account of the consumer’s tax position calculated in accordance with DISP App 4.3.31G.

(8)

The amount at 13.34R(3) adjusted to take account of the consumer’s tax position calculated in accordance with DISP App 4.3.31G.

Use of assumptions from DISP App 4

13.31

G

The BSPS calculator uses the assumptions in DISP App 4 Annex 1 for the purpose of calculating redress. These assumptions may include (depending on the type of case and the information entered in the calculator):

(1)

pre-retirement discount rate, adjusted for the default product charges and default ongoing adviser charges (see DISP App 4 Annex 1 8.1G and 9.1G);

(2)

post-retirement discount rate, adjusted for a pension commencement lump sum, if relevant (see DISP App 4 Annex 1 7G);

(3)

RPI inflation (see DISP App 4 Annex 4 3.1G);

(4)

CPI inflation (see DISP App 4 Annex 4 4.1G);

(5)

Earnings inflation (see DISP App 4 Annex 4 5.1G);

(6)

pension increases in payment, with reference to the relevant inflation index, caps and floors (see DISP App 4 Annex 1 6.1G);

(7)

default product charge % (see DISP App 4 Annex 1 9.1G);

(8)

default adviser charge % (see DISP App 4 Annex 1 9.1G);

(9)

Bank of England Base Rate;

(10)

mortality for consumer and spouse / dependant (see DISP App 4 Annex 1 10.1G);

(11)

spouse / dependant age difference (if the spouse / dependant date of birth is not available) (see DISP App 4 Annex 1 10.2G); and

(12)

proportion married / having a dependant at retirement age (if status unknown) (see DISP App 4 Annex 1 10.3G).

13.32

G

These assumptions will be derived in line with DISP App 4 Annex 1 and will be updated on a quarterly basis. All the assumptions needed will be automatically calculated based on the information inputted and the market conditions at the valuation date.

13.33

G

The BSPS calculator will be temporarily unavailable at quarter ends for a short period while updates for latest assumptions are made.

Step 4: work out redress offer for redress determination

13.34

R

The BSPS calculator will produce the following outputs:

(1)

a primary compensation sum, calculated in accordance with DISP App 4.3.19R and 4.3.20R;

(2)

a secondary compensation sum comprising any consequential losses, including any:

(a)

initial adviser charges on the DC pension arrangement and the primary compensation sum at (1) in accordance with DISP App 4.3.32G, calculated using the formula at DISP App 4.4.19R;

(b)

amount as described at 13.30R(6);

(3)

an additional compensation sum to compensate the consumer for the lapse of time between the valuation date and the payment date, calculated in accordance with the formula at DISP App 4 Annex 1 14.1G to 14.3G; and

(4)

the total of the amounts in 13.30R(7) and (8).

Step 5: redress determination

13.35

R

The amount at 13.34R(4) is the redress payable to a consumer in the form of a cash lump sum for the purpose of CONRED 4.4.2R.