Not upheld: mis-selling / provision of incorrect information regarding pension tax-free cash entitlement complaint against The Prudential Assurance Company Limited

Decision detail

Summary

Mr I complained that Prudential provided incorrect information over several years about his protected tax-free cash entitlement on his pension, leading him to believe he could take more than the standard 25%. He relied on this information when making retirement decisions, including stopping work. When claiming his pension in 2025, Prudential stated it had made a mistake and Mr I was restricted to the standard 25%, a difference of approximately £23,000. Prudential offered £1,000 compensation for distress and inconvenience. The ombudsman upheld this offer, finding that while Prudential's information was misleading, Mr I was not legally entitled to the higher amount because the 2006 assignment was not part of a scheme wind-up or bulk transfer, meaning the protected status was lost under HMRC rules. The additional funds remained in the pension and could be accessed subject to income tax, so no direct financial loss occurred.

The Ombudsman's reasoning

The ombudsman accepted that Prudential provided misleading information on multiple occasions, but concluded that Mr I was not legally entitled to the higher tax-free cash amount because the 2006 assignment was not part of a scheme wind-up or bulk transfer, meaning the protected status was lost under HMRC rules. While the error caused significant inconvenience and disrupted Mr I's retirement plans, the additional £23,000 remained in his pension fund and could still be accessed subject to income tax. The ombudsman found no direct financial loss as the money was not lost, only subject to taxation when withdrawn. The £1,000 compensation for distress and inconvenience was deemed fair and consistent with FOS guidance for such awards.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website