Pension scheme loses £1.5m Scottish Widows advice case

A case against Scottish Widows, brought by a company pension scheme over poor advice, has been rejected in the courts.

Trustees at timber manufacturer and haulage company WTL - which has been undergoing Pension Protection Fund assessment since July 2008 - alleged scheme actuary Eric Edwards had a potential conflict of interest when in 1999 he told them to switch from a deferred annuity contract to a management fund contract.

The pursuers claimed the fund suffered a loss of up to £1.5m as a result of Edwards' failure to:

• give an impartial and balanced assessment of the advantages and disadvantages of the switch;

• advise them on the value and importance of the guarantees in the DAC, and;

• give a detailed analysis of the options, including the option of leaving existing contributions with the DAC and investing future contributions in an MF contract.

The story first surfaced in 2008 when Actuarial Review Company director Roger MacNicol told IFAonline's sister title, Professional Pensions, Scottish Widows had a "case to answer".

He says: "Our concern is not to criticise Scottish Widows but to ensure our clients gain the redress they deserve. The last thing the financial services industry needs is another mis-selling scandal and we hope that Scottish Widows agree and work with us to grant compensation or restitution in early course."

However, Lord Hodge told the Court of Session in Edinburgh there was "no reliable evidence" to suggest the trustees would have acted differently if Edwards had given them more detail of Scottish Widows' commercial interest in encouraging policyholders to switch from their DACs to the managed fund.

The question of whether Edwards' had gone beyond his role as an actuary when he recommended the switch relied heavily on the views of Punter Southall chief executive Jonathan Punter.

Punter told the court it was his practice to advise a client on what would be an appropriate mix of equities and bonds to meet the minimum funding requirement in the future and that he would have done so had he been in Edwards's position.

On this point, Hodge concluded: "The court can only hold a defender to be negligent if it is satisfied that the professional view, which supports him, is not responsible or reasonable or is based on a misunderstanding of the relevant facts or is otherwise untenable.

"On that approach, which focuses on Mr Punter's evidence...the pursuers' case fails."

Roger MacNicol says while the loss was disappointing for WTL, other cases against Scottish Widows were "still very much alive".

He adds: "One of the major reasons the WTL case failed was because an IFA was heavily involved.

"There are other cases where the IFA wasn't as involved, two of which have issued writs against the Scottish Widows."

A Scottish Widows spokeswoman said the ARC's position was "intriguing".

"As far as I'm aware, the other cases are on hold pending the outcome of this case," she added.