PENSION-holders who believe they were victims of mis-selling by Scottish Widows have been told they face a looming deadline if they hope to benefit from more than £1 billion in legal claims against the firm.
The Actuarial Review Company (Arc), which is leading the charge against the group on behalf of affected pension funds – including that of the charitable Catholic Blind Institute – estimates that up to 200 funds each face an average £5 million shortfall as a result of a “mass switch exercise” in 1999.
Arc claims that trustees were given “inadequate and imbalanced” advice which resulted in them switching from deferred annuity into volatile stock market-based managed funds that were detrimental to their funding levels.
Arc, along with Edinburgh solicitors MBM Commercial have written to about 100 trustees of pension schemes to alert them that “time is running out” to lodge a legal action.
MBM argues that a “time bar” is due to come into effect in May before which trustees must submit documents to the courts. The deadline is expected to be five years from the date the schemes could be expected to have known about the potential loss resulting from the switch.
Cat MacLean, partner at MBM, said: “It would seem prudent for trustees to keep their options open by lodging a claim now. The process takes a few weeks so they really need to act as soon as possible since we think these cases may time bar in May.
“The real risk is if they wait to find out what is happening to the other cases they might then decide to raise proceedings only to find their case is proscribed. It is a decision for each set of trustees to make but time is running out.”
Critics of Arc’s latest attempts have claimed the actuarial consultant is leading a “last ditch attempt to drum up business”.
A similar case pressed by the pension trustees of timber manufacturer and haulage company, WTL International, and led by Arc against the Edinburgh pensions group was rejected by the courts in 2010. In the Court of Session commercial court, Lord Hodge dismissed the claim and awarded Scottish Widows “substantial” costs of the action. It is thought the loss of this case dissuaded many pension trustees from pressing ahead with their own claims.
But Roger MacNicol, director of Arc, insists that the remaining claimants have “a very good prospect of success” and the WTL case “didn’t succeed for relatively specific reasons”.
He confirmed that more than 20 pension schemes had signed up to press ahead with suits – with a number having recently paid MBM’s £2,000 fee to lodge papers with the courts to beat the time bar.
Scottish Widows said in a statement that it was surprised to see a re-emergence of the claims. “Scottish Widows is surprised that Arc are still actively pursuing trustees in this manner given that nearly three years have passed since our success in defending the claim by the trustees of the WTL Scheme. The Court of Session in Edinburgh at the time rejected all allegations of professional negligence and breach of contract by Scottish Widows.”
MacNicol said: “Some of the sponsors of the affected pension schemes are charities. An example is the Liverpool-based Catholic Blind Institute. Funded by donations, organisations like this need their funds to finance the fine work they do, rather than to shore up their pension schemes.”