Not upheld: DB pension transfer suitability complaint against Flying Colours Advice Limited (FCAL)

Decision detail

Summary

Mr M complained that FCAL provided unsuitable advice in October 2018 to transfer his defined benefit pension schemes and personal pension to a new personal pension arrangement. Mr M stated the transfer was unsuitable because the new pension was unlikely to perform well enough to provide better benefits, and he claimed he had no genuine home purchase plans and had disclosed health issues that a previous adviser had considered. FCAL's suitability report recorded that Mr M wanted to purchase a property and use his tax-free cash as a deposit, supported by fact-finding showing he was renting, had a partner with savings, earned £26,000 pa, and planned to buy a property in the £200,000-£250,000 range with a 15-year mortgage. The ombudsman found Mr M had a credible need to access his pension benefits for this legitimate objective, that FCAL's assessment was adequate, and that Mr M would likely have proceeded with the transfer anyway if FCAL had declined to recommend it.

The Ombudsman's reasoning

The ombudsman applied the regulatory starting position that DB transfers are unsuitable unless clearly demonstrated to be in the consumer's best interests. However, the ombudsman found that Mr M had a genuine and credible need to access his pension benefits to fund a property purchase, which was a legitimate objective that justified the transfer. The fact find and suitability report contained sufficient information to support this conclusion. The ombudsman found FCAL's assessment of suitability, capacity for loss, and attitude to risk were adequate. The ombudsman rejected arguments that FCAL should have identified vulnerability or that the stated objective was not properly tested, finding the evidence supported Mr M's genuine intention to purchase a property. The ombudsman also found that even if FCAL had advised against the transfer, Mr M would likely have sought another adviser or proceeded on an execution-only basis, meaning FCAL cannot be held responsible for the subsequent spending pattern.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website