Upheld: Pension transfer advice complaint against Wesleyan Financial Services Ltd
Financial Ombudsman decision DRN-3980448 of 2023-02-22T00:00:00+00:00. Pension transfer advice complaint against Wesleyan Financial Services Ltd. Outcome: Upheld.
Decision detail
| Reference | DRN-3980448 |
|---|---|
| Decision date | 2023-02-22T00:00:00+00:00 |
| Firm | Wesleyan Financial Services Ltd |
| Product | Pension |
| Claim type | Pension transfer advice |
| Outcome | Upheld |
| Remedy | Compensation to be calculated in accordance with FCA Finalised Guidance 17/9 as at the date of final decision using most recent financial assumptions. Calculation should include SERPS adjustment. If loss identified, compensation should be paid into pension plan if possible (allowing for charges and tax relief), or as lump sum with 15% notional tax deduction if pension payment not possible. Payment due within 90 days of acceptance, with 8% per annum simple interest for delays beyond 90 days. Maximum award £160,000 plus interest; any excess amount recommended (non-binding). |
Summary
Mr P complained in 2021 about unsuitable pension transfer advice given by Wesleyan in 1994 when he was 28 years old. Wesleyan recommended transferring his defined-benefit occupational pension (estimated to pay £4,542 annually at 65) to a personal pension, requiring a 10.9% annual return to match DB benefits. The ombudsman upheld the complaint, finding the critical yield exceeded reasonable growth expectations for someone with medium risk attitude and that no other benefits justified abandoning guaranteed income. Wesleyan was ordered to pay compensation calculated under FCA guidance FG17/9, up to a maximum of £160,000 plus interest, with any excess recommended as non-binding.
The Ombudsman's reasoning
The critical yield of 10.9% required to match the DB scheme benefits exceeded both the discount rate of 10.7% and the regulator's middle projection rate of 9%, which would be expected for someone with a normal/medium attitude to risk. This meant Mr P was likely to receive materially lower benefits than the DB scheme at retirement. While Wesleyan provided some risk warnings, these were insufficient and did not make unsuitable advice suitable. No other compelling benefits were identified that would justify transferring away from guaranteed, risk-free, increasing income. Given Mr P was an inexperienced investor with no other pension provision, he would have accepted clear advice against transferring if properly advised.
How this compares
| Group | Decisions | Uphold rate |
|---|---|---|
| Wesleyan Financial Services Ltd, all decisions | 35 | 33% |
| Pension transfer advice, all decisions | 7,542 | 54% |
| Pension, all decisions | 15,579 | 47% |
Source
Read the original decision on the Financial Ombudsman Service website