Not upheld: unsuitable advice - contracting out of State Earnings Related Pension Scheme (SERPS) complaint against Mantle and Partners (later Fairstone)

Decision detail

Summary

Mr P complained that advice received in December 1997 from Mantle and Partners to contract out of SERPS and take out a personal pension with Scottish Mutual was unsuitable. He claimed he was not adequately informed about the risks, costs, or that SERPS might provide better outcomes, and that his pension fund has underperformed compared to SERPS over the subsequent 28 years. The ombudsman rejected the complaint, finding that assessed in the context of 1997, Mr P's profile (age 22, average earnings of £16,500, balanced risk attitude, long time to retirement, and aspiration to retire at 55) aligned with those for whom contracting out could be beneficial under industry practice and provider calculations at the time. The ombudsman emphasized that performance alone cannot justify upholding a complaint decades later, and that the ability to review and contract back in at any time mitigated the risk of the advice.

The Ombudsman's reasoning

The ombudsman applied a temporal context principle, assessing the advice as it would have appeared in 1997 rather than with 30-year hindsight. The decision emphasizes that performance alone cannot justify upholding a complaint, and that backwards-looking reports showing many people were worse off due to contracting out cannot be used to conclude the advice was unsuitable at the time. The ombudsman found Mr P's circumstances (young age, average earnings, balanced risk attitude, long time to retirement, ability to review and contract back in, and aspiration to retire at 55) aligned with the profile of someone for whom contracting out could be suitable under the provider's own actuarial calculations. While acknowledging limited documentation about SERPS discussions and possible gaps in the advice process, the ombudsman concluded that even with full information, Mr P would likely have proceeded given what illustrations would have shown at projected returns of 6%, 9%, and 12%.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website