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How exposed are life insurers to enhanced transfer value misselling ?

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Patrick Kelliher

My previous post touched on how asset managers could be exposed to 3rd party misselling under the FSA’s PS07/11 on provider / distributor responsibilities [1] which places an onus on product providers to ensure their products are suitable for target markets and that marketing literature and other sales support is sufficient for customers and their advisers to understand risks involved. I think PS07/11 could now become a critical issue for life insurers as it may expose them to misselling liabilities in respect of enhanced transfers values (ETVs).

By way of background, ETV exercises were often undertaken by employers to reduce pension scheme liabilities or reduce their exposure to pension scheme risks. They typically involved deferred members who had left employment and were no longer accruing benefits but had still to reach retirement age. These were given incentives to transfer their benefits to a personal pension, thereby extinguishing the scheme’s liability. The...

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