Not upheld: pension death benefit administration; failure to facilitate timely transfer before tax deadline; adequacy of tax deadline warnings complaint against Hargreaves Lansdown Asset Management Limited

Decision detail

Summary

Ms C complained that Hargreaves Lansdown Asset Management Limited (HLAM) should have done more to inform her of the tax implications of not transferring her late husband's SIPP death benefit within two years of notifying HLAM of his death in September 2019, resulting in a substantial tax liability. The two-year tax-free deadline was 4 September 2021. HLAM warned Ms C of the deadline in letters dated 15 October 2019 and 6 April 2021, but Ms C did not respond to a cash warning request sent on 30 April 2021, and the funds were not transferred until August 2024 after she appointed an independent financial adviser. The ombudsman found HLAM's warnings were reasonably clear, that the cash warning requirement was fair despite exceeding minimum regulatory requirements, and that although HLAM provided poor service by not chasing the cash warning earlier, this did not cause the deadline to be missed given Ms C's prior notification of the deadline and her stated intention not to take income in 2021. The ombudsman upheld HLAM's offer of £300 compensation for poor service but rejected the complaint regarding the tax liability.

The Ombudsman's reasoning

The ombudsman found that HLAM provided reasonably clear warnings about the tax deadline in letters dated 15 October 2019 and 6 April 2021, and that the phrase 'tax may be payable' was not misleading given HLAM did not know Ms C's personal circumstances. The ombudsman determined that although HLAM should have chased the cash warning response earlier (poor service), this failure did not cause the deadline to be missed because: (1) the tax implications had already been clearly communicated; (2) subsequent chasers in 2022-2023 also went unanswered; (3) Ms C had stated in April 2021 she did not intend to take income; and (4) the cash warning requirement, while exceeding minimum regulatory requirements, was fair given the substantial cash holdings and the nature of inherited funds. The ombudsman concluded Ms C could have sought professional advice earlier if unclear, and that she appeared content to leave funds as they were until recently.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website