Summary note on the basis of claims for Active Wealth

15th May 2018

On 26 March 2018, FSCS declared Active Wealth (UK) Limited (“Active Wealth”)in default pursuant to COMP 6.3.2R on the basis that it is unable, or likely to be unable, to satisfy protected claims against it.

FSCS has received a number of claims for compensation in relation to Active Wealth, which entered creditors’ voluntary liquidation in February 2018.

Under COMP 3.2.1R, FSCS may pay compensation to an eligible claimant if it is satisfied that their application for compensation relates to a protected claim. A protected claim is a valid claim in respect of a civil liability owed by the firm (or its successor) to the claimant (or their successor) which is covered by FSCS.

FSCS must make its determination regarding whether or not to pay compensation in accordance with the relevant COMP Rules. FSCS has conducted a thorough examination of the claims it has received against Active Wealth to date, and is satisfied that there are claims where the conduct of Active Wealth gives rise to a civil liability in respect of which compensation is payable, on the basis summarised below.

In late 2017, members of the existing British Steel pension scheme were presented with the option of transferring into a new British Steel pension scheme (“BSPS2”), remaining in the existing scheme (thereby ending up in the Pension Protection Fund (“PPF”)), or  transferring out of the scheme altogether.

FSCS understands that Active Wealth advised a number of members to transfer their accrued pension benefits out of the existing British Steel pension scheme and into private arrangements, including into self-invested pension schemes (SIPPs). In some of these cases, the advice to transfer was unsuitable due to the nature of the accrued benefits which could have been carried forward into BSPS2 and which are unlikely to be matched through the private arrangement which Active Wealth recommended.

The FCA’s statement, in its June 2017 Consultation Paper (CP17/6), had concluded that the transfer out of a defined benefit pension scheme historically has been unlikely to be in the consumer’s best interests.  The Treasury Select Committee paper published in February 2018 indicated that the vast majority of members would have been better off had they transferred into BSPS2 rather than the PPF. 

In such cases, FSCS considers that Active Wealth breached its obligations under COBS, giving rise to a claim for breach of statutory duty. In particular, FSCS considers that Active Wealth breached its obligations under COBS 9.2.1R(1), which requires a firm to take reasonable steps to ensure that a personal recommendation, or a decision to trade, is suitable for its client. In addition, or in the alternative, FSCS considers that such transfer advice was negligent, on the basis that Active Wealth failed to exercise reasonable care and skill when advising consumers, giving rise to a claim in tort.

Subject to the facts of each claim, given the role of Active Wealth and the requirements of the COMP Rules, FSCS considers that the calculation of compensation on the basis of a comparison between:

(i)            the benefits that would have been available to the claimant had they transferred to BSPS2; and

(ii)           the current value of their new pension,

is likely to provide the claimant with fair compensation subject to the requirements of COMP 12.4.

15 May 2018