Money Covered: The Week That Was – 14 February 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.

The January edition of RPC's FOS complaints newsletter has now been published. This looks at recent developments that already have or are likely to impact, future developments and trends. To read the newsletter, please click here.

Headline Development

KVB Consultants Limited v Jacob Hopkins McKenzie Limited and others

Readers of The Week that Was will have seen that we have been following the case of KVB Consultants Limited v Jacob Hopkins McKenzie Limited and others after the original decision on summary judgment came out last year. To read our blog on this you can click here.

By way of an update for our readers, the Supreme Court has now listed the hearing of the appeal for 21 July 2025, and we will report further in due course.

Actuarial Risks 

DB schemes saw improved funding and will run on longer following LDI crisis

The Liability-Driven Investments (LDI) crisis following the "mini budget" of September 2022 significantly affected defined benefit (DB) pension schemes, forcing many to sell gilts to raise cash. However, research by Censuswide on behalf of LawDeb has shown that that the majority of DB schemes have seen improved funding since the crisis. The effect that the LDI crisis had on financial decision-making by scheme managers has led to changes in how schemes are approached, with many likely to run for longer or remain open.

The following results were found in the research:

Funding Impact:

• 61% reported increased funding in the short term (immediately after the crisis).
• 58% saw funding improvements in the medium term (2 months to 1 year).
• 56% experienced funding improvements in the long term (over a year after the crisis).
• 17% reported worsened funding in the short term.
• 15% noted worsened funding in the medium and long term.

Changes in Scheme Approach:

• 52% said their schemes are now likely to run-on for longer.
• 35% feel their schemes are more likely to run-on for good.
• 9% believe their schemes are more likely to reopen.
• 3% feel the crisis has accelerated the move to buy-out.

The results show that for most schemes, the LDI crisis led to stronger funding positions and shifted how financial decision-makers are handling their pension schemes moving forward. Commenting on the results, Sankar Mahalingham of LawDeb said: "What is now apparent is that for many schemes those turbulent weeks in 2022 led to a stronger funding (and often surplus) position, which has in turn led to corporate sponsors being more inclined to consider run-on as a possible solution in the medium or longer term. The recent Government announcement on changes to the surplus regime is therefore very timely. The new, more welcome, challenge for decision-makers (both corporates and trustees) is how to manage any surplus - something that may be new territory for many."

To read more, please click here.

Pensions 

Increase in domestic investment by defined-contribution pension providers

Following years of pressure from the government, the most significant defined-contribution pension providers will try to allocate up to 40% of illiquid portfolios to UK assets. From a survey of 15 defined contribution master trusts, it was found that the majority are seeking to invest between 21% and 40% in UK illiquid assets. The UK pension sector has a value of approximately £3 trillion, the government hopes that investing more nationally will expedite economic recovery. Since October 2023, trustees have been required to set out their policy on investing in illiquid assets in their annual statement of investment principles. Under the Mansion House Compact, agreed in July 2023, nine large defined-contribution providers agreed to each invest 5% of their funds, to a total amount of £50 billion, in UK unlisted equities by 2030. 

To read more please click here.

Pensions Dashboard - FCA guidance on MaPS connection for regulated providers 

On 27 January 2025, the FCA published guidance on how FCA-regulated pension providers should register their connection to the Money and Pensions Service (MaPS) pensions dashboard ecosystem.

Under the DWP’s timetable, providers with 5,000 or more members must connect by 30 April 2025, whilst those with fewer than 5,000 members have until 31 January 2026. The first step is to register the connection with MaPS.

Firms within the scope of COBS 19.11 must request a registration code from the FCA by completing the Registration Codes Request Form and sending it to pensionsdashboardscoderequests@fca.org.uk  with “Pensions Dashboards - Registration Codes Request” in the subject line. The request should include the name of the firm’s SMF16 (Compliance Oversight) holder.

Firms will typically receive two codes but may request more if connecting through multiple third-party organisations (TPOs) or integrated service providers (ISPs). The FCA will issue the codes or highlight any errors within two working days. Codes are valid for 30 days and will be sent directly to the SMF16, who should be available to receive them within that period.

Once codes are received, firms should follow the 'connecting via a third party' guidance on the Pensions Dashboard Programme website. TPOs and ISPs will advise firms when the codes are required to meet their agreed connection dates.

To read more, please click here.

Climate warning issued to pension providers

In a new report, campaign pressure group Make My Money Matter (MMMM) has found that the UK's largest pension providers are failing to address their role in financing the climate crisis. 

The report included scores sourced by sustainability research provider Profundo on themes such as commitment to targets, investment into climate solutions and stewardship instruments used. 

12 of the biggest providers were scored on a range of climate issues with the average score being 4.5 out of 10. MMMM reported that the continued investment in gas and oil is increasing global heating and accused the industry of financing the climate crisis. MMMM encouraged savers to challenge the climate performance of their providers. 

To read more please see here.

FOS Developments 

FOS to charge Claims Management Companies a fee for submitting complaints

Following the FOS' request for feedback in May 2024 on its proposals to implement fees for claims management companies (CMCs) and other professional representatives to bring complaints, they have now confirmed their intention to proceed in implementing the charging procedure. 
It is intended that in implementing fees and charges for CMCs to bring a claim to FOS, professional representatives will submit better evidenced and more well-rounded complaints before referring them. 

The changes follow the FOS finding that between April and December 2024, CMCs were responsible for approximately 47% of cases, and only 26% of those cases were found in favour of the consumer. This can be compared with 38% of cases found in favour of the consumer where the complaints were brought directly by the consumer. Further, CMCs will often charge consumers or take a percentage cut of the any award made by the FOS. The hope is that the new rules will incentivise professional representatives to ensure that the complaints they bring have merit and have a strong evidential basis.
The maximum fee level will be £250 on cases referred on or after 1 April 2025. £175 of that fee will be refunded if the case outcome is in favour of the consumer. This is in addition to the case fee of £650 charged to the financial business against whom the complaint was made, which is reduced to £475 is the complaint is not upheld or is withdrawn. 

CMCs will be able to bring ten 'free' cases to FOS in each financial year before the referrals will begin to be chargeable. It is estimated that the free case limit will mean that around 81% of CMCs will not incur a fee. The FOS service will remain free for consumers to refer a complaint themselves, for charities, families and friends who are helping them. 

To read more please click here and here.

Treasury Committee questions FOS and FCA about recent departure of FOS Chief Executive

 As we reported last week, the FOS Chief Executive and Chief Ombudsman, Abby Morgan, stepped down suddenly last week.  It appears that this news was surprising to the Treasury Committee, and they questioned Baroness Manzoor, FOS Chair, and James Dipple-Johnstone, Interim Chief Ombudsman extensively about her departure in a regular evidence session about the work of the FOS on 11 February 2025.

However, the Committee were apparently left unsatisfied by the answers provided. In a letter to the FOS, they stated that despite extensive questioning, "the circumstances surrounding Ms Thomas' sudden departure from the Financial Ombudsman Service did not appear to be fully shared with the Committee, preventing Committee Members from forming a full understanding of the process and circumstances which led to Ms Thomas’ exit and what that event might mean for the administration and operation of the FOS."

The letter to the FOS then sets out a series of further questions regarding Ms Thomas' departure, including queries about whether it was the result of some dissatisfaction with her performance or disquiet within the Board of the FOS.

The letter to the FCA strikes a similar tone, though it is focused on the relationship between the FCA and the FOS and seeks information regarding when and how the FCA was informed of Ms Thomas' departure, and whether they had any involvement with it.  

To read the letter to the FOS, click here; to read the letter to the FCA, click here.

Emerging Risks

Solicitor fined for putting client's ATE policies at risk 

A solicitor has been fined £7,000, plus ordered to pay costs of £20,000 by the Solicitors Disciplinary Tribunal (SDT) for putting clients' After the Event (ATE) policies at risk in failing to disclose adverse counsel's advice in mortgage mis selling claims. 

The solicitor advised the clients to take out ATE policies to protect against costs if the claims failed. It was a condition of the ATE policy that counsel's advice on prospects be obtained and provided to the ATE insurer, prior to proceedings being commenced. The solicitor obtained counsel's advice which gave negative prospects of success. The advice was subsequently not provided to the ATE insurer, and the solicitor proceeded to issue proceedings. It was only after contact by the SRA that the solicitor sought retrospective consent from the ATE insurer to issue proceedings. 

The SDT also found that the solicitor did not advise the clients that any other option of redress (i.e. the FOS), was available as an alternative to litigation.

We consider that in the SDT highlighting the failure to consider/advise on other options of redress, that this may direct more clients to pursue complaints to the FOS in first instance. 

To read more, please click here.

With thanks to this week's contributors: : Heather Buttifant, Hattie Hill, Melanie Redding, Alison Thomas, Kristin Smith, Eleanor Jones and Kerone Thomas.