HSBC has confirmed it is reviewing historic pension transfer business following a Financial Ombudsman Service ruling which forced it to return trail commission taken from a client over a three-year period.
Fos ruled that HSBC must return trail commission it took from a retiree after it failed to give ongoing pension advice, despite its contract with the client stating that ongoing advice would be provided.
The bank was ordered to repay the 0.5 per cent trail commission it took between 2006 and 2009, as well as pay an additional £350 for “stress and inconvenience” caused, according to a final decision notice issued in August and recently published on the Fos’s decision database.
A spokesperson for HSBC confirmed that its pension transfer business is now under review, which the bank claimed is standard practice after a ruling of this nature.
The statement read: “The circumstances surrounding this case are very specific, but as always with Fos decisions, we will review our portfolio to identify if there are any other customers in the same situation.”
Some have suggested the case could have wider ramifications for advisers earning historic trail from lapsed clients, but others argue that the case is singular because it relates to specific contractual clauses rather than trail commission more generally.
The client, referred to as ‘Mr J’, had transferred his existing funds to HSBC in August 2006 in order to commence taking ‘unsecured drawdown’, using the maximum tax-free cash initially as income between 2006 and 2008, and leaving residual pension pot invested.
HSBC sent documentation to the client making it clear that ongoing advice would “need to be undertaken”, but Mr J was unable to contact the bank to review income requirements failed, prompting him to complain in 2009.
Fos noted internal memos showing HSBC withdrew from offering advice on drawdown, but continued to take the 0.5 per cent trail commission.
ruth.gillbe@ft.com
