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Fidelity sets aside £3m to cover DC pension error

Fidelity set aside £3 million to cover costs associated with an administrative error in its DC pension business.

Fidelity sets aside £3m to cover DC pension error

Fidelity has set aside £3 million to cover costs connected to a processing error in its defined contribution (DC) pension business.

The error was identified in the financial year ending 30 June 2016 and revealed in financial statements for FIL Holdings (UK) Limited, which were filed at Companies House in January.

According to the financial statements Fidelity has put aside a provision of £3 million to cover 'potential remediation' and the cost of correcting an error in its DC pension business. 

The statements add that the error 'impacts a small percentage of the overall client base'.

A spokesman for Fidelity said the error related to historic issues surrounding DC schemes when they were set up.

'We have identified an administrative issue relating to the historic set up of a small percentage of our DC pension scheme client base (trustees/employers). In the majority of affected cases this will involve correcting some information and will have no impact nor involve any administrative impact on DC scheme members,' he said. 

'The provision in our accounts is for the cost of the work necessary to ensure this has been looked into and corrected. In the minority of cases, where it is found to be necessary, we would look to compensate.'

The £3 million provision did not make a dent in Fidelity's profits in the financial year ending 30 June 2016, as FIL Holdings recorded a pre-tax profit of £40.3 million compared to £27.5 million in the previous year. 

This increase was due largely to a rise in income from investment management fees as a result of assets under management increasing 18%. FIL Holdings received £472 million from investment management fees in the year ending 30 June 2016, compared to £469 million in the previous year.

It also received £74.5 million from service and platform fees in 2016, more than double the £29.7 million it received in 2015. 

This was offset by a fall in distribution revenue from £238.7 million in 2015 to £136.6 million last year. 

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