Upheld: unsuitable pension transfer advice; failure to apply FCA starting assumption that DB transfers are unsuitable; inadequate financial viability analysis; failure to properly explore alternatives; inadequate consideration of customer's circumstances and needs complaint against H C I Financial Services Limited trading as H C I Chartered Financial Planners

Decision detail

Summary

Mr S complained in 2025 that HCI's October 2012 advice to transfer his Section 32 pension with a guaranteed minimum pension (GMP) was unsuitable. HCI advised Mr S to transfer the pension to access a pension commencement lump sum and purchase an enhanced joint annuity, which would provide approximately £5,510 annual income compared to the guaranteed £7,138.86 he would receive at age 65 from the original scheme. The ombudsman upheld the complaint, finding that HCI failed to meet the FCA's requirement to clearly demonstrate the transfer was in Mr S's best interests, particularly given that Mr S was an inexperienced investor with low risk tolerance, had no immediate need for flexibility (as he intended to work full-time until age 65), had sufficient other assets to meet his needs, and would be left worse off in retirement. The ombudsman ordered HCI to calculate redress in accordance with FCA rules for non-compliant pension transfer advice, assuming Mr S would have remained in the Section 32 pension and taken benefits at age 65.

The Ombudsman's reasoning

The ombudsman applied the FCA's starting assumption that transfers from defined benefit schemes with guaranteed benefits are unsuitable unless clearly demonstrated to be in the customer's best interests. The ombudsman found that HCI failed to meet this threshold because: (1) the transfer would leave Mr S financially worse off in retirement (£5,510 annuity versus £7,138.86 guaranteed income); (2) Mr S had no genuine need for flexibility as he intended to work full-time until age 65; (3) the potential death benefits did not justify sacrificing guaranteed retirement income, and life insurance was not properly explored as an alternative; (4) Mr S was an inexperienced investor with low risk tolerance whose Section 32 pension represented a significant portion of his retirement provision; (5) Mr S had sufficient other assets and income to meet his objectives without transferring; (6) HCI's own documentation acknowledged the transfer would result in lower benefits. The ombudsman rejected HCI's argument that Mr S would have insisted on proceeding anyway, finding that Mr S relied on HCI's advice and would have accepted clear advice against the transfer if properly explained.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website