Pension schemes who claim they have been the victims of negligent advice from Scottish Widows, have been warned that they only have until May this year to launch legal action worth around £1bn against the insurer.

The Actuarial Review Company (ARC) has written to around 100 schemes, stating that a Time Bar will come into effect where schemes will not be able to pursue the case against the insurer concerning a mass switch exercise in 1999, where Scottish Widows advised schemes to give up deferred annuities and move into more volatile stock market based managed funds.

It has been estimated that around 200 schemes representing 20,000 members in total have been affected. A typical scheme is expected to have lost around £5m due to market movements since 1999 and annuity rate falls and the total potential liability to Scottish Widows is around £1bn.

As a result of working with ARC, Edinburgh based solicitors MBM Commercial LLP has offered a potential solution for trustees affected by the situation whereby for £2,000 trustees can lodge a case against Scottish Widows now and wait for 12 months before progressing it whilst observing the outcome of the next case to go to court.

ARC director Roger MacNicol said: “The switch exercise gave schemes “advice appropriate to your circumstances”, yet it was standardised and appears to have ignored schemes’ funding positions and trustees’ risk appetites.

“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 fund to finance the fine work they do, rather than to shore up their pension schemes.”

MBM Commercial LLP partner Cat MacLean commented: “Naturally with any court action the outcome cannot be predicted. However, 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.”

A Scottish Widows spokesperson said: “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.”

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