Court of appeal confirms decision that claim in relation to pension transfer and drawdown advice is time barred

Author:Joanna Gray
Position:University of Newcastle upon Tyne, Newcastle upon Tyne, UK
SUMMARY

Purpose – The article's aim is to report and comment on the Court of Appeal case Shore v. Sedgwick Financial Services Ltd & Others. Design/methodology/approach – The article outlines the facts surrounding the appeal and comments on the ruling. Findings – The Court of Appeal reached the same conclusion as the trial Judge as to the outcome– both... (see full summary)

 
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Shore v. Sedgwick Financial Services Ltd & Others (Court of Appeal: Lords Justices Buxton, Keene and Dyson).Date of judgment: July 23, 2008

@Facts

The factual background to this appeal was given in the last issue of JFRC Vol 16(3) p. 274 but for ease of reference the factual summary provided by Lord Justice Dyson is set out in full here:

Mr Shore was born on 7 October 1940. Since 1981, he had been employed by companies in the Avesta Group. In 1984, he was employed as managing director of Avesta Sheffield Distribution Limited (“Avesta”). He was a member of the Avesta occupational pension scheme. This was a two-thirds final salary scheme which, if taken at age 60 (7 October 2000), would have entitled Mr Shore to a tax-free lump sum of £ 155,000 and a pension of £ 54,900 pa gross. Most of the annual pension would not have been index-linked. Mr Shore was entitled to take early retirement and to elect to start drawing benefits under the Avesta scheme before the age of 60, but the benefits that he received before the age of 60 would have been reduced at a compound rate of 12% pa. Thus, if he retired in January 1997, he was entitled to a tax-free lump sum of £ 140,400 and a pension of £ 34,300 pa gross; if he retired in November 1997, he was entitled to the same tax-free lump sum and a pension of £ 39,900 pa gross.

In June 1996, British Steel acquired effective control of Avesta and decided that the Avesta scheme would be wound up from 1 December 1996. Members of the Avesta scheme were given three options the first of which had to be exercised by 31 January 1997: (1) transfer their benefits to the British Steel scheme; (2) transfer the value of these benefits into a personal pension plan; and (3) leave their benefits in the Avesta scheme for eventual transfer to the British Steel scheme. Under (3), all members of the Avesta scheme would receive a pension exactly equal to that which they would have received had the Avesta scheme not been wound up, the only difference being that the benefits would be paid by British Steel.

Mr Shore had sought advice about his pension from SFS from time to time from October 1995. The [Sedgwick Financial Services – hereafter “SFS”] SFS advisers with whom Mr Shore dealt were (or at least included) Mr Ormond and Mr Fry. At a meeting on 14 January 1997, Mr Shore told Mr Ormond that he had decided that he would prefer to leave his benefits in the Avesta scheme rather than transfer into the British Steel pension scheme. Mr Ormond suggested that Mr Shore might wish to consider an income drawdown policy.

There was a further meeting on 20 January. Mr Ormond had obtained illustrations from Scottish Equitable of an income drawdown scheme on the basis of assumed growth rates of 6%, 9% and 12%. At or shortly after the meeting, a financial needs analysis questionnaire was completed by Mr Ormond for Mr Shore. Approval by the SFS Pension Transfer Unit was required before a SFS adviser could recommend any investor to purchase an income drawdown policy. On 22 January, Mr Ormond obtained approval of his recommendation that Mr Shore should purchase such a policy.

Mr Ormond then prepared a personal financial report for Mr Shore. It is dated 23 January. The report recorded that Mr Shore intended to take early retirement and that his objective was to take the maximum tax-free cash sum. It is unnecessary to consider the detail of the report. In view...

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