This case study is an anonymised composite based on publicly reported PI claim patterns. It is not actual Apex client data and does not constitute legal or insurance advice. Names, locations and identifying details have been changed. Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority, FRN 724952.
A four-adviser IFA firm in the Midlands, regulatory revenue around £1.9m, with a typical mass-affluent client base centred on retirement planning and intergenerational wealth. The firm held FCA permission for defined benefit (DB) pension transfer advice through one Pension Transfer Specialist (PTS) on the team — a common structure in the period before the FCA’s heightened scrutiny of the sector.
The client was a 56-year-old senior engineer at a large engineering company in the West Midlands, with a deferred DB pension of approximately £36,000 a year at scheme normal retirement age, a cash equivalent transfer value (CETV) of £1.18m, and a sizeable defined contribution pension elsewhere. The client had been introduced by another long-standing client and the brief was set out clearly in the first meeting: he wanted “flexibility”, was considering early retirement, valued the ability to leave a lump sum to his adult children, and was concerned about scheme solvency despite the scheme being well-funded.
The firm’s fact-find and the PTS’s analysis identified the client’s objectives, attitude to risk (a balanced profile that nudged towards cautious-balanced), capacity for loss (assessed as moderate given other assets), and a critical yield analysis showing the required investment return to match the DB benefits. The recommendation was to transfer. The advice letter was full and well-structured.
In our experience the issue was not whether the advice could pass a checklist but whether it engaged with the starting assumption against transfer required by COBS 19 and the FCA’s repeated guidance — most importantly FG21/3 on advising on pension transfers. The advice letter recited the starting assumption but the reasoning that displaced it was thin: it relied substantially on the client’s stated preference for flexibility and the inheritance objective without rigorously testing whether those objectives could be met without giving up guaranteed income. The required critical yield was met optimistically on a central case assumption set; downside scenarios were less developed.
The client transferred in 2019. Markets were broadly favourable in the following years but the client’s effective decumulation rate was higher than the central case had assumed because his early retirement actually happened. By 2024 the pot was depleting faster than projected. A retail review against the FCA’s redress methodology indicated that, had the suitability assessment fully engaged with the starting assumption against transfer, the recommendation should have been not to transfer.
The client complained, then took the matter to the Financial Ombudsman Service. The FOS, applying the redress methodology set out in PS22/13 (the FCA’s calculator-based methodology for DB transfer redress, building on the earlier FG17/9 and the 2017 framework), concluded that the firm should put the client back in the position he would have been in had he remained in the scheme. The calculated redress, factoring in the client’s actual circumstances, scheme assumptions, gilt yields at the calculation date and the value of the residual pot, came in at approximately £315,000.
The FOS award ceiling at the relevant time was £415,000 (the post-2019 ceiling, uprated annually with the CPI). The award was within the ceiling. Above ceiling, the client could in principle have pursued the firm for the balance in the civil courts on Hedley Byrne and COBS 9 / COBS 19 grounds, but in this matter the FOS award covered the loss.
PI cover for IFAs is FCA-mandated under the IPRU(INV) handbook and the policy responded. Section 5 notification went in on receipt of the firm’s first awareness of the underlying complaint. The wording paid the FOS redress in full subject to the firm’s £25,000 excess per claim.
A series of harder coverage questions arose. First, aggregation. The firm had taken on a meaningful cohort of DB transfer cases between 2017 and 2019, several of which were now in complaint or review. The MGA-led wording in place contained a defined “series of related acts or omissions” wording. Whether each transfer was a separate “claim” attracting a separate limit, or whether some or all of them were a single series, was the focus of careful coverage analysis. The wording resolved in this matter in the firm’s favour — each was a separate fact-pattern, separate client, separate suitability assessment — but on a different wording it could have gone the other way. Second, the policy’s “FOS complaints” clause: most IFA wordings respond to FOS-determined awards, but some narrow the cover where the underlying conduct involves a regulatory breach. The careful drafting of those clauses matters at the renewal stage. Third, section 11 Insurance Act 2015 — the provision that prevents an insurer relying on non-compliance with a term not relevant to the actual loss. The firm had been a few weeks late with a particular regulatory return filing; the insurer (correctly) did not seek to rely on this.
The £2m limit was untroubled. The £25,000 excess applied. Defence costs sat in addition to limit.
The redress was paid. The firm engaged a specialist past-business review to look at the full cohort of DB transfer recommendations during the relevant period; approximately 22% required some form of remedial action. Each was notified to the insurer as a circumstance and worked through. Total exposure across the cohort came to approximately £1.6m over the following two policy years, sitting comfortably within the firm’s renewed primary limit of £2m once an additional £3m excess layer was placed at the following renewal.
The firm’s PI premium rose by approximately 90% at the first renewal post-claim, and the excess doubled. The firm continues to trade. The PTS has retained his qualification but the firm has elected to do new DB transfer business by referral to a specialist firm only.
DB transfer claims define this sector at the moment. First, the starting assumption against transfer is the single most important framing on every file; an advice letter that recites it without testing it does not satisfy the FCA standard. Second, the firm’s PI wording must be carefully analysed for the aggregation language — the difference between “each and every claim”, “series of related acts”, and “circumstance giving rise to claims” wording can be a six-figure or seven-figure difference on a DB book. Third, past-business reviews should be commissioned proactively when concerns arise rather than reactively when complaints arrive; the FOS and the FCA both look more favourably on firms that have themselves identified and remediated issues. Fourth, the renewal disclosure under section 3 must capture not only known claims and complaints but the broader landscape of the firm’s DB transfer book; underwriters expect a granular conversation. Fifth, IFA firms that have ceased writing new DB business should still maintain run-off cover for at least six years after the last advice was given, and the run-off limit needs to be calibrated to the live book.
The IFA market for DB-impacted firms requires real specialist broking. We approach the small group of insurers that genuinely understand the FCA’s PS22/13 methodology and can underwrite the cohort risk — rather than the broader generalist market that has largely withdrawn from this space. On the claims side, the careful framing of FOS-determined awards within the policy wording, and the coordination of the past-business review with the insurer’s claims team, has materially affected outcomes. At renewal, the difference between a 90% rate increase and a 150% rate increase is the renewal pack and the broker’s market relationships — both of which we bring to the table.
Apex Insurance Brokers serves UK professional services firms and commercial businesses. Call 0117 325 0027, email hello@apexinsurancebrokers.co.uk, or request a quotation.
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