Upheld: Pension transfer advice complaint against Pension Works Limited
Financial Ombudsman decision DRN-4506419 of 2024-01-10T00:00:00+00:00. Pension transfer advice complaint against Pension Works Limited. Outcome: Upheld.
Decision detail
| Reference | DRN-4506419 |
|---|---|
| Decision date | 2024-01-10T00:00:00+00:00 |
| Firm | Pension Works Limited |
| Product | Pension |
| Claim type | Pension transfer advice |
| Outcome | Upheld |
| Remedy | PWL must undertake a redress calculation in accordance with FCA Policy Statement PS22/13 and DISP App 4. The calculation should: (1) assume Mr M would have remained in the DB scheme; (2) use the DB scheme's normal retirement age of 65 as the basis; (3) use the most recent financial assumptions in line with PS22/13; (4) if a loss is demonstrated, offer redress as a cash lump sum with the option to augment the current defined contribution pension; (5) explain to Mr M that redress will be invested prudently; (6) apply a notional income tax deduction of 15% (20% on 75% of compensation to account for tax-free cash element); (7) be calculated and submitted promptly following Mr M's acceptance. |
Summary
Mr M sought advice from PWL in March 2017 regarding transferring his defined benefit occupational pension scheme to a personal pension. PWL recommended the transfer in April 2017, citing Mr M's stated objective to purchase a holiday property in Tenerife. Mr M accepted the recommendation and transferred his pension. In early 2023, Mr M complained that the advice was unsuitable and had caused financial loss. The ombudsman upheld the complaint, finding that PWL failed to clearly demonstrate the transfer was in Mr M's best interests as required by COBS 19.1.6G. The transfer was not financially viable (critical yield of 8.32% unlikely to be met), Mr M had low risk tolerance and capacity for loss, and the DB scheme was his entire pension provision aside from state pension. Although Mr M had objectives regarding the Tenerife property, PWL improperly prioritized these over his long-term financial security. The ombudsman rejected PWL's argument that Mr M would have transferred anyway, finding that as an inexperienced investor, Mr M would likely have reconsidered if properly advised against the transfer. PWL was ordered to calculate and pay redress in accordance with FCA Policy Statement PS22/13.
The Ombudsman's reasoning
The ombudsman applied the starting assumption under COBS 19.1.6G that a DB transfer is unsuitable unless the firm can clearly demonstrate it is in the client's best interests. PWL failed to meet this burden. Although Mr M had stated objectives to purchase a Tenerife property, PWL was not entitled to simply accept those objectives and recommend a way to achieve them without considering whether the overall advice was in his best interests. The transfer was not financially viable (critical yield of 8.32% unlikely to be met), Mr M had low risk tolerance and capacity for loss, and the DB scheme represented his entire pension provision aside from state pension. While consumer objectives are relevant, they cannot override the requirement to provide suitable advice that protects long-term financial security. The ombudsman rejected PWL's argument that Mr M would have transferred anyway, finding that Mr M was an inexperienced investor who relied on professional advice and that his plans were not sufficiently advanced or compelling to overcome professional advice against transferring. The fact that Mr M's Tenerife property purchase did not ultimately occur suggested his plans were not fixed.
How this compares
| Group | Decisions | Uphold rate |
|---|---|---|
| Pension Works Limited, all decisions | 14 | 29% |
| 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