Positive Solutions has been told to compensate a client after it failed to transfer her whole pension fund when she bought an annuity.
The Financial Ombudsman Service has ordered Positive Solutions to put a client, known as Mrs B, as close as possible to the position she would have been in, had her protected rights fund been used to purchase an annuity in 2012.
The firm was also told to pay her £200 for the trouble and upset she has been caused.
Mrs B had a pension plan with an insurance company and in March 2012 she planned to start drawing an income from this plan.
In the months leading up to March 2012, the insurer had sent Mrs B and her adviser at Positive Solutions incorrect valuations of her pension plan.
Mrs B decided that she wanted to make a complaint against the insurer and at the end of March 2012, her total fund, including the protected rights fund, was paid to a second insurance company in order to buy a lifetime annuity and release a tax free cash sum.
The adviser arranged for the new insurer to return the protected rights fund to the original insurer, as well as to return the tax free cash lump sum element of the protected rights fund to the old insurer.
But in September 2014, the old insurer wrote to Mrs B to advise her of the sum that remained with it. She was confused by this, as she believed that the whole fund had been transferred in 2012.
With the support of her adviser, Mrs B complained to the original insurer that it had not correctly acted on her instructions in 2012. But the original insurer replied it had acted on the instructions it received.
Following discussion with the Fos, Mrs B complained to Positive Solutions that she had been mis-advised in 2012.
Ombudsman Alison Cribbs upheld the complaint, pointing to a fact find completed by Positive Solutions which recorded that Mrs B was risk-averse and didn’t want to remain invested and wanted the certainty of a defined income.
“The correct advice in 2012 should have been to use the protected rights fund to buy an annuity and to separately pursue the complaint against (the original insurer) about the incorrect valuations,” stated the decision notice.
“Even if the use of the open market option was difficult, Positive Solutions should have considered the alternatives and advised Mrs B appropriately,” said Ms Cribbs, adding: “I had not seen any evidence that it did so.”
Fos ruled the protected rights fund could have been added to the non protected rights fund to purchase an annuity and had it been placed separately, it may have been more challenging to buy an annuity but it would have been possible.
Although Mrs B was an “intelligent and incisive individual”, Fos noted she had become thoroughly confused and believed that the tax free cash lump sum was being returned because she had been overpaid – not that the protected rights fund was being reinstated.
There was no evidence of a conversation between Positive Solutions and Mrs B as to how, on the resolution of her complaint with her original insurer, the protected rights fund would be used to generate a tax free cash lump sum and/or an income, Fos noted.
Positive Solutions disagreed with Fos claiming Mrs B had not been confused, adding the letters she wrote proved this was the case.
The adviser also suggested the reason for leaving the protected rights fund with the original insurer was to pursue the complaint about the incorrect valuations, but Fos stated this wasn’t necessary, and wasn’t in Mrs B’s best interests.
