An adviser has written to MP Grant Shapps, urging him to defend the 15-year long-stop, after the Financial Ombudsman Service took five years to resolve a historic case against him.
Speaking to FT Adviser, Brian Lentz explained that the case was regarding a teacher who had contacted him to say he'd investigated his pension scheme options and as he wanted to retire early in the future, at 55, he wanted to know what he could do.
This client interaction happened in 1990; nearly 30 years on, the ombudsman closed the case and did not offer any compensation.
This was despite Fos not awarding against him.
Lentz also had to fight against his personal indemnity insurers twice at the Royal Courts of Justice over their refusal to pay out in case Fos found against him. Lentz won both battles.
Advisers have often told FT Adviser such cases, whereby a 15-year long stop could protect them but fails to do so, have left them and their peers potentially exposed to claims against them, well into retirement.
In the letter and meeting with his constituency MP Shapps, Lentz said he wanted the MP to fight to ensure the Financial Conduct Authority and Financial Ombudsman Service follow the law laid down by Parliament.
He urged Shapps to take action about the defence of a 15 year longstop to prevent "stale claims".
Shapps, who is currently the secretary of state for defence, wrote to the chancellor following his discussion with Lentz.
Background
Lentz said he saw the client in 1990 when the new "personal pension" launched by the Conservatives was in place, which replaced the Section 226 Retirement Annuity Contract.
“The idea was the personal pension was taken by the individual from job to job, to avoid the massive losses people were facing in the new age of job mobility, whereby they were leaving a job in under two to five years, and finding the employer took their contributions back,” he said.
“The personal pension was "portable".”
Lentz said he ran numbers and after adjusting the client’s salary considering inflation, he told him that the personal pension option was not guaranteed, but approved retirement from age 55.
“The Teachers Scheme would have massively penalised early (before 60) retirement but the position in 1990 was that the government decided it didn't have the funds to pay a "bridging" pension.”
In this case, ‘a bridge’ between retirement and the scheme retirement age, so five years - unless on the grounds of ill health.
“Therefore, any teacher retiring early would have to get the bridging pension from their local authority,” Lentz said.
He explained that the local authorities across the country stated that they did not have the funds and would not pay for the early retirement of any teacher no longer serving the community through early retirement - so at the time, Lentz said it was not possible to retire early under the Teachers scheme.
