Money Covered: The Week That Was – 25 April 2025

Welcome to The Week That Was, a round-up of key events in the financial services sector over the last seven days.

The third episode of Season 4 of our podcast, Money Covered – The Month That Was, where the team discusses developments that we expect to see in 2025 in relation to Financial Services and Accountants is now available.

To listen to this and all previous episodes, please click here.

Headline Development

FCA replaces portfolio and Dear CEO letters

The FCA has confirmed that from the end of this month, it will stop issuing portfolio letters and Dear CEO letters and instead will publish a small number of market reports, focussing on insights from its supervisory work.
 
The change comes amid the FCA's Consumer Duty Requirements Review and seeks to streamline the regulator's supervisory priorities and promote more effective regulation. 

To read more, please click here.

Insurance Broker updates

SFO charges UK Broker with bribery in Ecuador

The Serious Fraud Office (SFO) has charged United Insurance Brokers Limited (UIB), a Lloyd's insurance and reinsurance broker, with failing to prevent bribery in a case linked to the awarding of lucrative contracts in Ecuador. It is alleged that UIB failed to prevent a US-based intermediary from paying $3 million in bribes to Ecuadorian officials between 2013 and 2016. The SFO's case is that the bribes were paid to secure $38 million worth of reinsurance contracts with state run companies, including the state water and electricity companies. 

The charges are brought under the UK's Bribery Act 2010 which creates a criminal offence for companies who fail to prevent bribery if an "associated person" bribes another individual for the business, even if the organisation itself was unaware. A company can defend a charge of failure to prevent bribery, if it can show that it had "adequate procedures" in place to prevent associated persons from undertaking acts of bribery. 

Nick Ephgrave, Director of the SFO, commented that "The SFO remains committed to stamping out international bribery wherever it may occur. British companies have a duty to prevent the harm caused by bribery when doing business at home and abroad, to ensure that the UK remains a safe and fair place to do business."

A UIB spokesperson has said that "No individual employees or officers of UIB, past or present, have been charged" and that it "will carefully consider the SFO's decision".

Representatives of UIB are due to appear before Westminster Magistrates Court on 7 May 2025 to face the charges. If the case proceeds to trial, it would be the first time that a jury in an SFO prosecution has been asked to deliberate on whether a company failed to prevent bribery.  

To read more, please click here.

Financial Institutions 

The FCA have opened zero cases of non-financial misconduct in two years

According to a Freedom of Information request submitted by Investment Week, the FCA has not opened, closed, or taken enforcement action on any non-financial misconduct cases since January 2023. The FCA's response indicates that no cases have been active or resulted in any form of enforcement action during this period.

This development follows the FCA's previous efforts in 2023 to address non-financial misconduct, notably in the case of hedge fund manager Crispin Odey. Odey was banned from the UK financial services industry and fined £1.8m due to a lack of integrity. However, despite these high-profile actions, the FCA has not initiated any new cases related to non-financial misconduct in the subsequent two years.

The FCA's limited action in this area has raised concerns among industry experts, who argue that the regulator's focus may be too narrow and that it should take a more proactive stance in addressing non-financial misconduct within the sector.

Pensions 

Pension Ombudsman refuses to extend three-year limitation period

In a determination dated 24 December 2024, the Pension Ombudsman Service (POS) decided not to uphold a complaint against the NHS Business Services Authority (NHS BSA) regarding an additional tax charge to the Complainant caused by the payment of a pension arrears lump sum. 

The Complainant was a member of the NHS Pension Scheme. In 2014, he suffered from an illness and applied for an incapacity pension which was rejected by NHS BSA on the grounds that the Complainant was likely to recover before his retirement. In 2021, the Complainant complained to the NHS BSA about the 2014 decision and his complaint was upheld and his pension backdated to 2014. However, the payment resulted in additional tax charges for the Complainant which led him to make a complaint to POS on the basis that more tax had been deducted than would have been deducted in 2014.

POS did not uphold the complaint on the basis that it related to a 2014 decision and therefore was out of time (as per the Limitation Act 1980) and that it was not reasonable to extend limitation via the three-year limitation period at section 14A.  POS went on to determine that, whilst there had been errors in the recalculation and payment of the benefits in 2021, the NHS BSA had remedied these when the Complainant received a pensions arrears lump sum.

To read more, please click here.

Scheme did not have a duty of care to advise member on tax consequences

POS partially upheld a complaint by a member who incurred a substantial tax charge after withdrawing his entire scheme benefits at age 75. 

The Complainant was a member of the Aegon Stakeholder Plan (the Scheme). As the Complainant approached his 75th birthday, the Scheme notified him of his pension options and the tax issues that arose at age 75. The Scheme recommended that the Complainant take financial advice and informed him that his Scheme benefits would automatically default to a cash fund at age 75 if they did not hear from him. The Complainant did not take financial advice and / or respond to the Scheme's correspondence and as such, his funds were switched to a cash fund when he reached the age of 75. The Complainant then chose to withdraw his entire benefits, resulting in a large tax charge. 

POS found that the Scheme was not under a duty of care to advise the Complainant on the tax consequences of withdrawing the entire pension and therefore was not responsible for the tax consequences of the member's actions. 

This decision serves as a reminder that it is difficult for a member to successfully argue that a scheme has a duty to advise on individual tax circumstances.

To read more, please click here.

POS upholds Complaint against administrator that failed to automatically issue pension savings statement has failed to meet commitments and caused distress 

POS has upheld a complaint by an NHS Pension Scheme member who did not receive pension savings statements (PSSs) for three consecutive tax years despite exceeding the annual allowance (£40,000). The administrator delayed issuing the statements, breaching both legal deadlines and its own commitment to provide PSSs when combined pension growth across schemes surpassed the limit.

Although the member incurred a tax charge, POS ruled that the administrator was not liable for financial loss (as the member's eventual pension benefits would likely outweigh the tax charges) but did find it constituted maladministration. The administrator was ordered to pay £1,000 for the distress and inconvenience caused.

This case illustrates wider issues in the NHS pension scheme around the complexity of annual allowance rules and reporting requirements. It also shows that, while administrators may go beyond legal duties, failing to meet those extra commitments can lead to accountability and penalties.

To read more, please click here.

No grounds for higher pension increase despite past overpayments 

In April 2022 Mr N complained that his annual pension increase had been capped at 3% when the fund previously provided for annual increases of the lower of 5% and the increase in the Retail Prices Index. 

Mr N stated that the higher 5% cap was confirmed in a communication introducing a separate pensionable earnings limitation, acceptance of which was a condition of receiving that year's salary increase. Whilst the communication acknowledged a potential contradiction with the pension scheme rules, it stated that accepting the salary increase would override those rules. When Mr N noticed that the fund had reverted to the previous 3% cap, he requested that either the 5% cap be reinstated or the cap on pensionable salary be removed, resulting in a recalculation of his pension backdated to its commencement in 2011.

POS did not uphold Mr N's complaint on the basis that (a) the trustee was required to pay pension increases as specified by the fund's governing documentation, which includes a 3% cap; (b) there was no evidence of a direct link between the introduction of the cap on pensionable salary and any promise to pay pension increases capped at 5%; and (c) the communication mentioning the 5% cap indicated that it might not be possible to amend the pension scheme rules.

POS found that the trustee was acting correctly by applying the 3% cap in accordance with the fund rules and pensions legislation.

To read more, please click here.

Pension minister announces small pension pot consolidator  

The government has unveiled plans to create a pensions pot consolidator as part of its 'Plan for Change' initiative. The government estimates that there are currently around 13 million forgotten pension pots holding £1,000 or less due to individuals moving between employers. It is anticipated that the consolidator will increase the pension of the average earner by around £1,000 and also save the industry £225m a year in administration costs. 

Commenting specifically on the announcement, the pension minster stated that "there are now more small pension pots in the UK than pensioners – raising costs and hassle for workers trying to track their savings. It also costs the pensions industry hundreds of millions of pounds every year".

To read the announcement, click here.

Regulatory developments for FCA regulated entities  

Advice guidance reform a priority

At the end of 2024, the FCA published its consultation paper, setting out proposals for 'targeted support' which is intended to bridge the gap between current guidance-based services and bespoke advice. The purpose of targeted support is to allow greater accessibility and more affordable financial guidance and support to consumers. 

Speaking to the Personal Investment Management and Financial Advice Association women's symposium earlier this week, the Economic Secretary to the Treasury stated, that the FCA's 'targeted support' framework is a priority and an "exciting opportunity" despite its complex nature.

To read more on the consultation paper, please click here.

Relevant case law updates 

Court of Appeal clarifies approach to adverse inferences from lack of records

In Johnstone v Fawcett's Garage (Newbury) Ltd [2025] EWCA Civ 467, the question for the trial judge to determine was whether exposure to asbestos whilst in the employment of the respondent had caused a 'material increase in risk' of the deceased appellant contracting mesothelioma. At trial, the parties' experts disagreed on the correct approach to the calculation of risk, with the trial judge having preferred the respondent's evidence. On appeal, the appellant contended that an adverse inference ought to have been drawn from the respondent's lack of air monitoring records, such that the appellant's expert evidence ought to have been preferred.

Considering the underlying case law, the Court of Appeal refused to interfere with the trial judge's conclusions. Whilst adverse inferences from a lack of evidence in the form of appropriate records certainly could, in principle, be drawn, typically this would be done where the parties put forward competing factual evidence, which had not been the case here. Moreover, even where adverse inferences were applied to issues of expert evidence, this would have to be done on a case-by-case, fact-sensitive basis. Relevant in this case were the facts that, even had the records in question been kept, they could properly have been destroyed some twenty years before the trial (and thus the failure to keep records had not caused a lack of evidence), and that the adverse inference point had (a) not been properly pursued at first instance; and (b) not been clarified to outline the precise inference the appellant wanted the court to have made.

You can read the judgment here.

With thanks to this week's contributors: Shauna Giddens Daniel Parkin, Rebekah Bayliss, Haiying Li, Damien O'Malley, Nitin Mathias, Faheem Pervez, Zak Sutton and Joe Towse.