Not upheld: Pension transfer advice complaint against Fairstone Wealth Management Limited

Decision detail

Summary

Mr B, aged 31 and a financial services professional earning over £250,000 annually, complained that Fairstone's 2010 advice to transfer his £144,500 DB pension to a personal pension was unsuitable and negligent. Fairstone recommended the transfer citing generous CETVs, extremely favourable critical yields, investment flexibility, and retirement flexibility. The ombudsman found that while Fairstone could have provided more detailed risk warnings and better explained lost guaranteed benefits, the critical yields of 3.8% and 3.4% were substantially below FCA projection rates of 7%, indicating Mr B would likely receive significantly higher retirement benefits from the transfer. The projected personal pension benefits were almost treble the yearly pension and over quadruple the tax-free cash compared to the DB scheme. The ombudsman concluded the advice was suitable and did not uphold the complaint.

The Ombudsman's reasoning

The ombudsman applied the FCA's starting assumption that DB transfers are unsuitable unless clearly in the client's best interests. The critical yields of 3.8% and 3.4% were substantially below the FCA's mid-level projection rate of 7% and the FOS discount rate of 6.9%, indicating Mr B was likely to receive significantly higher retirement benefits from the transfer. The projected personal pension benefits were almost treble the yearly pension and over quadruple the TFC compared to the DB scheme. While Fairstone could have provided more detailed risk warnings and better explanation of lost guaranteed benefits (spouse/dependents' pensions), the substantial projected financial gains outweighed these procedural shortcomings. Mr B's status as a financial services professional and his demonstrated interest in investment flexibility (evidenced by changing funds shortly after transfer) supported the suitability of the recommendation. The ombudsman found the advice was thorough enough to clearly demonstrate the transfer was in Mr B's best interests.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website