“It's also worth understanding your PII position. So, as an example, some PII insurers will not cover cases where the advice was given to somebody who was under 55 at the point of the advice.
“That's problematic because actually, if you have written advice to people who are under minimum retirement age, it's really, really hard to show that's suitable - that's an even higher hurdle.”
She told firms there was no point in looking at redress day to day because it can change but understanding if the client book is healthy was important.
“In terms of understanding what exposure you have - and this plays into the polluter pays proposals if they do take effect - there are options you could use to fulfil FCA requirements.”
One option is to look at a firm’s excess so typically, PI insurance will have an excess per case and firms could just look at the number of potential cases that might be raised and multiply that by that excess.
“If you've written a lot, you might be going over your limits of indemnity so your limited cover might not be enough or you might have cases that are excluded, which you'd need to think about separately.
“The consultation paper from the FCA very much guides people down a route to look at what's been paid in the past and adjust it for the circumstances of your case.
“This sounds right in theory, but in practice, how you would adjust that is difficult.”
Abraham said another option that people will often use is to look at the total transfer value they have paid and multiply it by percentage.
The going rate for the British Steel was 16 per cent which was the one fiirms had to use in the first of the British Steel asset retention tests.
However, she argued this percentage was not really the right one to use for most schemes because British Steel's got very specific circumstances in that people were either going to end up with Pension Protection Fund benefits or BSPS benefits.
“So in theory, the redress is lower on British Steel than any other scheme would be and that's partly what we're seeing come through,” she said.
A more robust option would be to do an accurate calculation for every case which might work but firms need to ensure there is enough data.
sonia.rach@ft.com
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