Beyond Simple Cash Differences: Why Generalist Accounting Fails FCA Redress Benchmarks (FG17/9)

The offer that creates the next complaint

Where advice or an administration error caused a loss, the firm has to pay the loss. Practices that settle on a cash-in, cash-out difference often underpay. The client, or the Ombudsman, then complains about the offer. The second case is more expensive than doing the sum properly the first time.

Defined benefit transfer redress is governed by the FCA’s guidance in FG17/9, as updated, and by the methodology under DISP App 1 where that appendix applies. The aim is the same in either case: put the client in the position they would have been in had the failing not occurred. That is a counterfactual. It is not the difference between two bank balances.

What the counterfactual has to include

• The benchmark the client would have held: the ceding scheme, or the suitable portfolio, valued on the redress date.
• Charges that would have been paid on that path, and charges that were paid on the path taken. Both, so the comparison is net of the right friction.
• Tax. A redress payment can itself be taxable, and the lost path may have had different tax treatment. Grossing up, where the guidance requires it, is part of the figure.
• The date of the calculation, and the assumption set. A number with no date is not a calculation.

A generalist accounts comparison that stops at contributions versus current value will miss the guaranteed benefits given up, or the suitable asset allocation the client never received. Either miss is an underpayment. Paying a round sum “to be fair” on top of a wrong calculation does not cure it, and it can overpay.

Summary

Redress is a reconstruction, not a cash difference. Calculated to FG17/9 and DISP App 1, it closes the loss once.