Last Updated: Thursday, November 07, 2002 06:02 PM





Tuesday 30th October 2002 


Following many requests by ELID for a clarification of how the MPR related to other reviews and compensation schemes and of MPR progress generally I was invited, as Chairman of ELID, to attend a presentation by the MPR Team. The following notes cover the main points of the discussion. The Team was most helpful in clarifying what was going on although good news was at a premium! 


  1. EL’s Team is Andy Gordon (EL’s Compliance Officer), Steve Elliott (Senior Manager for Regulatory Reviews), Gino Corsini (MPR Project Manager) and Milton Smith (Compliance Manager for MPR).

  2. Purpose was for the Team to explain how far the MPR had got, criteria for entitlement for compensation and how MPR related to other compensation issues, notably the latest s425 draft proposal announced at the end of September.

  3. The MPR had its origin in a PIA inspection visit in 1998 when queries were raised by this regulator about whether the documentation and vetting of clients was adequate to cover the special risks of MPs. EL was not the only Provider affected but it did dominate the income drawdown sector. It is not clear whether the PIA query was reported in Annual Reports or Regulatory Returns for 1998/2000 but the 2001 Annual Report refers to a  provision to cover MPR compensation  which relates to some 22,000 MP policies sold into both WP Fund and Unitised Fund since 1996. It is assumed that the bulk of MPs relate to the WPF although EL could not offer a breakdown. The mid October 2002 mailshot is the latest ‘happening’ on the MPR. The FSA determined the contents of the questionnaire that many policyholders and ex policyholders have received over recent weeks. This might explain why many recipients have queried the relevance of the questions to the problems of MP policyholders.

  4. It was confirmed that the MPR is an entirely separate issue from the latest s425 Draft Proposal announced at the end of September and arising out of the B&WD review which was also overseen by FSA.

  5. The MPR became sidelined during the debate on Compromise Proposals at the end of last year resulting in very limited action other than pilot studies during which several hundred cases have been identified as not qualifying. Staff are now being trained to deal with individual cases but athough EL was not able to offer a precise programme my assumption from the discussion is that cases might be determined from mid 2003 to completion at the end of 2004. When the MPR first came to light in early 2001 we were told that EL expected only a small number of MP policies would be found to have been missold. It appears from information given however that it will be necessary to review all cases.

  6. Most important, EL stated that methodology for determining compensation has also not yet been worked out and agreed with FSA and that it could not give a date when that would be done. EL agreed that in some cases recission may be an appropriate remedy in MPR cases in contrast to the Opinion attached to the B&WD Report dealing with nonGAR compensation. The Team emphasised the intention by the FSA and EL to adequately compensate qualifying cases under the MPR.

  7. EL confirmed that complaints made to the Ombudsman (FOS) relating to issues covered in the MPR have been ‘parked’ by FOS until determined under the MPR procedures. It is not clear how FOS is dealing with multi headed complaints that might cover suitability (MPR), non declaration of GAR liabilities (B&WD/s425), and breach of contract but these issues will be followed up with FOS. It is assumed that the nonGAR misrepresentation complaints are also being ‘parked’ but FOS have not yet responded to our request for a clear statement as to whether its determination of complaints is being pre-empted by the FSA and EL. The result of this action could have the effect of limiting claims and already appears to many to have delayed matters.

  8. Principal criteria for qualifying for compensation under MPR is whether a MP was ‘suitable’ for the investor’s personal circumstances having regard to the customer’s knowledge of the product, whether the level of investment risk was properly explained by the Provider, the customer’s attitude to risk and that information provided to the customer was fair and not misleading. EL did not agree with my contention that non declaration of the GAR liabilities meant that all MP policyholders qualified on all counts.

  9. If a MP policyholder is deemed by EL not to qualify under the MPR, he can ask EL to reconsider the matter and if EL repeats its rejection the complainant can then go to FOS. Clearly this could take the process into 2005 for the slowest cases.

  10. In summary, the MPR and latest s425 Proposal (covering compensation for non GARs who left before the Compromise Proposal deadline) are separate issues. Therefore policyholders who stayed with EL post Compromise may still qualify under the MPR.  Ex policyholders may qualify under the MPR and the latest s425 for misrepresentation as set out in B&WD. Rectification cases may also qualify under the MPR in some circumstances.

  11. Good news: potential multiple claims for compensation. Bad news: whole business potentially mired in administration delays, to-ing and fro-ing between EL and FSA and the staff are still being trained.

  12. I asked about progress on Rectification and it was claimed that some settlements had been made, although not many.  They had nothing to add to the note sent recently to rectification candidates saying that they hoped to have sent out all Rectification offers by mid 2003.

  13. Conclusions:  a clear statement is required from FOS/FSA as to how FOS is dealing with complaints, the need to press for an acceleration on all fronts as deadlines have continually slipped.

  14. The cost of dealing with regulation compliance and reviews such as the MPR presumably falls on the fund and this must be very significant given what was learnt at the meeting.

Geoffrey Glover

Chairman, ELID


Note: Members of ELID include continuing and ex Managed Pension policyholders. ELID allows individual members to compare notes on progress made or otherwise on the various issues affecting this policyholder class. ELID is part of E7. Membership enquiries to gjg@onetel.net.uk