Upheld: Pension transfer advice complaint against Fairstone Financial Management Limited
Financial Ombudsman decision DRN-5723552 of 2025-07-30T00:00:00+00:00. Pension transfer advice complaint against Fairstone Financial Management Limited. Outcome: Upheld.
Decision detail
| Reference | DRN-5723552 |
|---|---|
| Decision date | 2025-07-30T00:00:00+00:00 |
| Firm | Fairstone Financial Management Limited |
| Product | Pension |
| Claim type | Pension transfer advice |
| Outcome | Upheld |
| Remedy | Fairstone must pay compensation calculated in accordance with FCA Policy Statement PS22/13 and DISP App 4: (1) For the DB element: undertake a redress calculation assuming Mr M took benefits from April 2017, using current financial assumptions, and pay any loss as a cash lump sum (with option to augment pension) after notional 20% income tax deduction; (2) For the DC element: compare actual pension value at decision date with notional value had it remained in the original scheme, and pay any loss into the pension or directly to Mr M (with 15% notional tax reduction if paid as cash); (3) Add 8% simple interest on DC losses if settlement not arranged within 90 days; (4) Repay adviser fees with 8% simple interest only if paid separately outside the pension. Maximum award: £195,000, with recommendation to pay any balance exceeding this amount. |
Summary
Mr M complained that Fairstone's advice to transfer both his DB and DC occupational pension elements in 2017 was unsuitable. At the time, Mr M was being made redundant, intended to semi-retire, had a cautious risk profile with only 10% capacity for loss, and relied on his pension as his major retirement asset. Fairstone recommended transferring approximately £421,029 to a personal pension, citing flexibility, control, and death benefits. However, Mr M was already in a good position with a DB scheme providing guaranteed rising income (£8,417-£9,300 per annum) plus a DC scheme offering flexibility. The critical yields required to match the DB benefits (7.68% to age 65) far exceeded the FCA's discount rate of 3.3%, indicating Mr M would likely receive substantially lower benefits. The ombudsman upheld the complaint, finding Fairstone failed to clearly demonstrate the transfer was in Mr M's best interests as required by COBS 19.1.6, and ordered compensation calculated under FCA redress rules, up to a maximum of £195,000.
The Ombudsman's reasoning
The ombudsman applied the regulatory starting assumption that transfers from DB schemes are unsuitable unless clearly demonstrated to be in the client's best interests. Mr M was in a good starting position with a blended approach: a DB scheme providing guaranteed rising income (approximately £8,500-£9,300 per annum) plus a DC scheme offering flexibility. The critical yields required (7.68% to age 65, 39.85% to age 59) were significantly higher than the FCA discount rate of 3.3% for the period, indicating Mr M would likely receive substantially lower benefits. Given Mr M's cautious risk profile, limited investment experience, low capacity for loss (10%), and the fact that his pension was his major retirement asset, the transfer exposed him to unacceptable risk. The stated advantages (flexibility, control, death benefits) were either already available through the DC scheme or did not justify the loss of guaranteed income. The recommendation report failed to explain why transferring the DC element was suitable. Mr M could have met his income needs through the DB pension (rising to match his requirements by state pension age), supplemented by the DC scheme's tax-free cash and potential part-time work, without transferring.
How this compares
| Group | Decisions | Uphold rate |
|---|---|---|
| Fairstone Financial Management Limited, all decisions | 39 | 55% |
| 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