A Tenet adviser has been criticised by the Financial Ombudsman Service for telling a client to transfer from an occupational pension to a personal plan that couldn’t realistically match the former scheme.
A self-employed client in his 30s, referred to as Mr S, attended several meetings with TenetConnect Services Limited’s adviser in 2000 and 2001.
Mr S had built up 15 years of benefits in his occupational health scheme and Tenet recorded his attitude to risk as two to three on a scale of zero to five, recommending he transfer deferred benefits from the occupational pension scheme to a personal pension.
In 2014 Mr S complained to his personal pension provider about the sale of the policy, with that provider passing it to Tenet.
Tenet rejected the complaint, stating the transfer took place after several meetings with the adviser, so Mr S had a lot of time to consider the options, adding he was willing and able to take the level of risk required to achieve the desired outcome.
Yet a Fos adjudicator recommended Mr S’s complaint should be upheld, stating the high critical yield needed to match the occupational pension scheme benefits wasn’t realistically achievable; plus the client could no longer could access a similar scheme.
Tenet disagreed with the adjudicator’s conclusion, forcing ombudsman Alison Cribbs to review the case.
She pointed out the critical yield needed for the personal pension plan to match the benefits provided by the occupational pension scheme at age 60 was calculated as 7.6 per cent.
“To improve Mr S’s pension a return above this would have been required year on year. Because of this, I consider that the level of risk required for Mr S to achieve the required returns was too high.
“I think that the risks involved in the transfer were more than a medium or balanced level of risk,” read her decision, adding: “I am not persuaded that the fact that there was a state scheme offset makes the advice suitable.”
Pension providers were required at the time to use assumed growth rates of 5 per cent, 7 per cent and 9 per cent in illustrations.
Tenet will now pay the client £150 for his trouble and upset. It must also contact Mr S’s former employer to see if it would be willing to reinstate him into his former scheme at Tenet’s expense.
If it isn’t possible, Fos told TenetConnect Services to carry out a review of this transfer in line with the regulator’s guidance. If a loss is established, Tenet must pay redress in line with the methodology for the pension review.