Watson Wyatt faces legal challenge over advice

US – Consulting firm Watson Wyatt could be facing a lawsuit over advice it gave to a US pension scheme in the late 1990s – though it says it has fully answered the questions that were raised.

As the trend to point the finger of blame for pension fund woes increases, Watson Wyatt is under scrutiny over advice it gave to the scheme for a US animal breeding firm called Sygen – formed from the break-up of Dalgety - back in the late 1990s.

According to a report in the Times newspaper, Sygen’s lawyers are looking at possible “inappropriate” advice received in 1998 by Dalgety’s pension fund trustees. No one was immediately available for comment at Sygen.

Watson Wyatt has issued a statement of response, saying: "We confirm that we have been in discussions with PIC Sygen in the past over concerns that it had about advice said to have been given in the context of Dalgety's disposal programme.

“We have answered fully the questions that PIC have raised with us and were last in contact with them in September of last year following which we have heard no further from them. We can only assume that they were satisfied with the responses provided."

Sygen told the Times that the investigation process had not got very far.

If Watson Wyatt is taken to court by Sygen it will become the first actuarial company to face a law suit as a result of pensions advice. Actuaries top the list of those being blamed for losses accrued by pension fund members. Fears that the Sygen threat could be the first of many are causing concern for underwriters. Insurers are warning that actuaries are becoming uninsurable.

David Robertson of the secretariat at the Association of Consulting Actuaries commented: “Clearly at the moment this raises the issue of professional indemnity insurance for actuaries. Underwriters are fearful of these sorts of actions taking place. That is the issue for our members, and we have set up a working committee to look into the problem.”

Leonie Edwards, spokeswoman at the Association of British Insurers disagrees that actuaries are uninsurable as yet. “It is a case of waiting and seeing. If we see more in the way of litigation, then there will be an impact on the market and an impact on cost. We will have to assess the nature and intensity of a law suit if it arises,” she said.

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