The attached model guidance issued by the Financial Services Authority (FSA) sets out procedures and standards

which PIA and other frontline regulators are expected to adopt for phase 2 of the review of pension transfer and opt out/non-joiner business sold between 29 April 1988 and 30 June 1994. The PIA Board, having taken account of representations made to it in response to the Consultation Paper 7, has decided for the purposes of PIA rule 7.2.2(2),1 to adopt this guidance subject to the following modications.

Firms will see that the principal difference between the approach used for the priority review and that now introduced by the FSA for phase 2 arises in the area of investor identication (and thereafter in the procedures for collecting information from investors where a review is required). Indeed, the FSA model guidance states (paragraph 2) that beyond these initial stages, the procedures and standards for the case review process . . . (i.e. for any further gathering of information and for assessing loss, compliance, causation and redress) remain unchanged from those set out in guidance previously issued by the SIB. In the interests of continuity for its members, the PIA Board have modied this part of the guidance so that PIA rms should, for any further gathering of information and for assessing loss, compliance, causation and redress, continue to use guidance previously issued by the PIA2 (other than where it relates to the Accord see below).

As was stated in Consultation Paper 7, (jointly produced by the PIA and the FSA), and is restated in the nal policy statement published with this guidance, PIA considers the design of the phase 2 review to be consistent with the Accord reached for the purposes of the priority review with the majority of insurers which provide professional indemnity (PI) insurance cover to PIA
1

Under Rule 7.2.2 (2) PIA may prescribe the standards and a specication for the conduct of any review of any aspect of investment business which PIA requires its members to undertake. Pension Opt-Outs and Non-Joiners Section 1 published April 1995, Transfers Section 2 published July 1995, Redress Assessment Section 2 published August 1995, Notes on the Pension Opt-Outs and Non-Joiners and Transfers Review published December 1995, Simplifying the Pensions Review: Statement of Policy published January 1997. In addition the PIA has published a number of statements relevant to the review including various regulatory updates.

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regulated rms (the Accord). PIA therefore sees no case which would necessitate a different approach for rms with PI cover and has therefore decided that the terms of model guidance for phase 2 now published by the FSA (and modied as stated above) should be applied to all rms regulated by the PIA. As a result, the PIA Board has decided that where members have cases to be reviewed they may (with effect from 14 August 1998) adopt one of only two approaches to phase 2 of the pension review. They may either: Approach 1: adopt the direct invitation approach as specied in the attached model guidance (in which case they must wait until 4 January 1999 to start direct invitation mailings, in order to co-incide with the publicity campaign which is an integral part of this approach for phase 2); or Approach 2: adopt the all-to-return priority review procedures3 (in which case they may start phase 2 as soon as they wish). The modied letters used by rms subject to the Accord during the priority review (the Accord letters4) may not be used for phase 2 cases with effect from 14 August 1998. This decision reects the PIA Boards view that the direct invitation letters specied in the attached guidance are consistent with the priority review Accord, and that it is not in the interests of either consumers or rms (both of which prefer clarity and simplicity in review procedures) for two types of direct invitation mailings to co-exist side by side. Where rms with PI insurance are prohibited by their insurer from using Approach 2 above, the Board is aware that the decision has the effect of preventing such rms from getting on with phase 2 before 4 January 1999. It has taken the view that this position is justiable given that the younger and less pension-aware nature of the phase 2 population makes a publicity campaign integral to the phase 2 direct invitation approach; and further that, in order to allow time for consumer and industry bodies to advise on the design of that campaign, it cannot start before next year. Where rms decide to use Approach 1, any transfer cases not already being reviewed should be mailed in accordance with paragraph 13 of the attached model guidance. Where rms are able to identify investors as opt outs or nonjoiners (even though they will not have completed a Pension Review Form), these investors should be mailed in accordance with paragraphs 16 and 17 of the attached model guidance. Any remaining investors (other than those who

Including the Identication and Gathering Information procedures set out in Pension Opt Outs and Non-Joiners Section 1 published April 1995 and Transfers Section 2 published July 1995. Published in The Pensions Review Essential Step in March 1996.

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took out a rebate-only policy) should be mailed in accordance with paragraphs 18 and 19. Until 30 June 1999 (or later if required by the PIA), all rms that used Accord procedures for priority cases must put procedures in place for the automatic review of phase 2 cases where the investor dies or retires. (They do not, however, need to introduce such procedures in respect of priority cases.)

Where rms using the Accord have, by 14 August 1998, already contacted phase 2 investors using the Accord procedures (including the prescribed Accord letters), there is no need for rms to contact these investors again. Any follow up letters still outstanding should be sent, but no additional investors should be contacted using this method. There is no requirement for rms who have done this to contact the PIA for credit for work done. Firms should of course be able to demonstrate if asked to by the PIA that they have applied the appropriate standards to all cases. Where this work has not been carried out correctly and to an adequate standard, rms may be required to take remedial action. Where rms using the Accord are in the process of carrying out remedial work at the request of the PIA involving the Accord procedures this should continue. Firms may have used letters other than the Accord letters to invite potential phase 2 investors to request a review. Alternatively, they may have altered Accord letters, for example to include reference to the investor being nonpriority. Consistent with paragraph 58 of the attached model guidance, any phase 2 investors who have not responded to this (non-Accord) invitation positively (i.e. they have not asked for their case to be reviewed) should be dealt with in accordance with the attached model guidance. Such investors will therefore receive another invitation to request a review after 4 January 1999. Finally, rms may have already been told by a phase 2 investor (in response to an Accord letter or otherwise) that they do not want their case to be reviewed. Consistent with paragraph 59 of the attached guidance, rms do not need to write again to such investors. However, during the currency of phase 2, should such investors wish to re-consider their decision (perhaps in response to seeing the publicity campaign), a rm should agree to review their case in response to a request.

As with the review of priority cases, PIA encourages all rms with PI insurance to keep their insurers fully informed of the steps that they are taking in conducting the phase 2 review.
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