Published on 21 January 2019

In this chapter of our Annual Insurance Review 2019, we look at the main developments in 2018 and expected issues in 2019 for pensions.

Key developments in 2018

The issue of self-invested personal pension (SIPP) operator liability has hardly been out of the headlines in 2018. The Financial Ombudsman Service (FOS) saw a record number of complaints about SIPP operators and the Financial Services Compensation Scheme imposed an additional levy on the market to meet the rising cost of meeting claims. The extent to which SIPP operators can be held liable for the investment decisions of SIPP members has continued to receive scrutiny, and uncertainty as to the position remains. The Pensions Ombudsman has continued to hold that the duties of SIPP operators are limited but the FOS has consistently held SIPP operators to more onerous standards, expecting them to have undertaken due diligence on proposed investments and any introducers involved.

In a well-publicised case one SIPP operator, Berkeley Burke (BB), judicially reviewed the FOS’s decision to uphold a complaint against it. In October 2018 the court held that the FOS had been entitled, under its “fair and reasonable” jurisdiction, to uphold the complaint on the basis that BB should have undertaken further due diligence and refused to accept the proposed investment into the member’s SIPP. While each complaint to the FOS will turn on its own facts, this provides helpful guidance on what due diligence the FOS will expect SIPP operators to have undertaken.

The position in civil proceedings remains unclear pending the court’s decision in the case of Adams v Carey, which is still anticipated at the time of writing following a trial in March 2018. It is thought that the decision in that case will lay down much needed guidance on the civil liability of SIPP operators.

What to look out for in 2019

2019 may see the Government taking further steps towards its stated intention of protecting defined benefit (DB) schemes by further strengthening the powers of the Pensions Regulator (PR). Following the publication of a white paper in March 2018, the Department for Work and Pensions (DWP) undertook a consultation from June to August 2018 on a potential suite of new powers and enforcement options for PR.


These powers are intended to make it easier for PR to intervene when employers or trustees do not comply with statutory obligations or when employers (or those associated or connected with them) are avoiding their pension liabilities. The proposed changes could see PR given the ability to impose fines of up to £1m and to trigger criminal proceedings in certain circumstances. Look out for DWP taking further steps towards this objective during 2019.


Other matters to look out for in 2019 include the Government taking further steps towards the introduction of collective defined contribution schemes (CDCs) once the current DWP consultation closes in January 2019. CDCs are pooled defined contribution schemes designed to allow for an element of risk-sharing and cross-subsidy between members.


Also look out for fallout following the High Court’s October 2018 decision in the Lloyds pension trustees case, which confirmed that schemes are required to equalise guaranteed minimum pensions.


Authored by George Smith.


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