Not upheld: Pension transfer advice complaint against Nucleus Financial Services Ltd

Decision detail

Summary

Mr P transferred his personal pension worth approximately £28,000 from Nucleus to a newly established SSAS in March 2015, following a cold call from an unregulated firm (FRPS) that encouraged him to invest in an overseas property development (White Sands Beach Resort in Cape Verde) through TRG. The investment subsequently failed and appears to have little value. Mr P complained that Nucleus failed to warn him of scam risks or conduct adequate due diligence on the transfer, contrary to the Scorpion guidance and PSIG Code that were in effect at the time. The ombudsman found that Nucleus did breach its regulatory duties by failing to send the Scorpion insert and conduct proper due diligence, which would have revealed multiple red flags including the newly established SSAS, lack of employment link, cold call marketing, and involvement of an unregulated adviser. However, the complaint was not upheld on causation grounds because Mr P had consulted his regulated financial adviser who advised the investment was risky, yet Mr P chose to proceed anyway, demonstrating he would likely have gone ahead regardless of additional warnings from Nucleus.

The Ombudsman's reasoning

The ombudsman found that Nucleus breached its regulatory duties under Principles 2, 6, and 7 and COBS 2.1.1R by: (1) failing to send Mr P the Scorpion insert warning of pension scams; and (2) failing to conduct adequate due diligence on the transfer request in accordance with the PSIG Code, which would have required investigating the newly established SSAS, lack of employment link, cold call marketing, and overseas investment. However, the complaint is not upheld on causation grounds. The ombudsman reasoned that even if Nucleus had conducted proper due diligence and sent the Scorpion materials, Mr P would likely have proceeded anyway because: (1) Mr P had already consulted his regulated adviser Mr S about the TRG investment; (2) Mr S had advised the investment was risky; (3) Mr P chose to proceed despite this warning; (4) the Scorpion insert would not have resonated with Mr P as he was not seeking early access to his pension; (5) Nucleus could reasonably have taken comfort from the fact that a regulated adviser was involved and Mr P had consulted him; and (6) Mr P's own actions demonstrated he was willing to proceed despite warnings about risk. The ombudsman distinguished between being told an investment is 'risky' (which all investments are) and being told there are scam warning signs, but found that the combination of warnings from both the Scorpion materials and his regulated adviser would not have changed Mr P's decision given his demonstrated willingness to proceed despite Mr S's advice.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website