Not upheld: insufficient due diligence on pension transfer; failure to provide Scorpion scam warnings complaint against Phoenix Life Limited

Decision detail

Summary

Mr S transferred his pension to a QROPS in October 2014 following a cold call from High Street Group, which recommended the transfer and unregulated CFS investments. Phoenix Life processed the transfer after receiving requests from two regulated firms (AWM and Servatus). The investments became worthless when CFS went into liquidation following investigation for fraud and money laundering. Mr S complained that Phoenix Life failed to conduct sufficient due diligence and should have provided stronger warnings. The ombudsman found Phoenix Life should have sent updated Scorpion guidance and asked more questions about the transfer circumstances, but concluded that Mr S would likely have proceeded anyway given he believed he was receiving advice from a regulated firm (AWM), and therefore did not uphold the complaint.

The Ombudsman's reasoning

Phoenix Life had obligations under PRIN and COBS to act in the client's best interest and should have had regard to Scorpion guidance as matter of good industry practice. While the 2013 Scorpion leaflet about early release pension liberation would not have felt relevant to Mr S (who was approaching 55), Phoenix Life should have sent the updated Scorpion leaflet received in July 2014 when the transfer request came in October 2014. Phoenix Life should also have asked more questions about how the transfer came about, which would likely have revealed the cold call from High Street Group and involvement of AWM. However, once Phoenix Life learned Mr S was being advised by a regulated firm (AWM), they could reasonably assume he would receive appropriate advice and have regulatory protections. The presence of a regulated adviser, combined with the genuine QROPS and absence of early release/cash incentive offers, would have given Phoenix Life reasonable comfort that scam risk was low despite some warning signs. Even if Phoenix Life had sent updated Scorpion warnings or asked more questions, Mr S would likely have proceeded with the transfer as he believed he was receiving appropriate regulated advice.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website