Upheld: Other regulated complaint complaint against Nucleus Financial Services Ltd

Decision detail

Summary

Mr W and his brother complained to the Financial Ombudsman about how Nucleus Financial Services Ltd handled the administration of their mother's SIPP pension following her death in May 2012. Although Nucleus was notified of the death in December 2012, the death claim was not submitted until April 2016, resulting in a 45% tax deduction (£97,780) on the £220,823.76 fund value. Under HMRC regulations, the payment would have been tax-free if made within two years of notification. The ombudsman upheld the complaint, finding that Nucleus failed to follow its own terms and conditions by not converting assets to cash upon notification, failed to stop sending statements to the deceased, and failed to remind the beneficiaries of the approaching two-year deadline. The ombudsman determined that if Nucleus had acted properly, the death claim would have been submitted by February 2013 and paid tax-free. Nucleus was ordered to pay redress calculated to put the beneficiaries in the position they would have been in had proper procedures been followed, less amounts already paid by Firm T's PI insurers.

The Ombudsman's reasoning

The ombudsman found that Nucleus received clear written notification of Mrs W's death in December 2012 when Firm T contacted it via electronic messaging. This notification triggered HMRC's two-year window for tax-free payment of death benefits. Nucleus's own terms and conditions required it to sell non-cash assets and hold proceeds on deposit upon written notification of death. Nucleus failed to do this and continued sending statements to the deceased. Had Nucleus followed its procedures, the assets would have been converted to cash, which would have prompted Firm T to submit the death claim promptly (by February 2013), allowing payment within the two-year window without tax deduction. Additionally, Nucleus should have reminded Firm T of the approaching two-year deadline. The ombudsman rejected arguments that notification and death claim submission are entirely separate matters, finding that Nucleus's failure to act on notification created the circumstances leading to the tax charge. The ombudsman also rejected claims for additional income tax, student loan repayments, and accountant's fees, finding these were either not direct losses or were exacerbated by Mr W senior's decision to take the full payment himself rather than split it with his brother.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website