Back in 2000, when he was aged 55, Mr M took his defined benefit workplace pension.
In June 2009 he started a self-invested personal pension and contributions were paid into this pot up until April 2012.
Mr M had been a client of the same individual financial adviser since the 1980s and he said the intermediary therefore had a good understanding of his financial situation and knew he had taken the scheme pension in 2000.
Between August and November 2012 the adviser was dual authorised – he was an approved person for both True Potential and another business.
In September 2012, while representing the other business, the adviser arranged for Mr M to send a letter to his Sipp provider instructing it to pay him ongoing adviser fees of 0.35 per cent a year of the plan fund value to provide ongoing advice and servicing.
At that time the Sipp fund value was about £400,000.
Then in October 2012, while representing True Potential, the adviser arranged for Mr M to complete a transfer of servicing request form in respect of the Sipp that confirmed to the provider that responsibility for servicing of the plan and "any future renewal fees” should be switched to True Potential.
In November 2012 the Sipp provider updated its records and started to pay the fees to True Potential, in line with the instruction it had received.
Mr M said in agreeing to pay the fees to the adviser, he expected to receive ongoing pension advice and to be kept up to date on any legislative changes that might affect his position.
Then on 5 December 2012 the government announced, as part of the 2012 Autumn Statement, that from 6 April 2014 the lifetime allowance would be reduced from £1.5m to £1.25m.
The lifetime allowance is the maximum value of pension benefits that an individual can have without a tax charge being applied.
So as not to disadvantage individuals who had already built up significant pension benefits, Fixed Protection 2014 was made available for those who had or expected to have pension benefits valued between £1.25m and £1.5m.
The deadline to apply for this protection ended on 5 April 2014.
As his adviser had retired, Mr M later found a new adviser to provide advice in connection with his Sipp.
The new adviser made him aware that the total value of his pension benefits may exceed the lifetime allowance at the age of 75.
Since Mr M had missed the deadline of 5 April 2014 to apply for Fixed Protection 2014, he wasn’t able to apply for LTA protection of up to £1.5m.
So, on the advice of the new adviser, he applied for Individual Protection 2014 of £1.302m to mitigate the impact of the lifetime allowance charge at age 75.
Mr M subsequently complained to True Potential, which didn't uphold the complaint and referred to the terms of business he had with the business the adviser had previously represented, which stated advice was only provided when requested.
True Potential argued the fees it had received were for the original advice to establish the Sipp in 2009 and not for ongoing advice.
But as a gesture of goodwill, True Potential offered to reimburse to Mr M the fees it had been paid after the transfer of servicing rights to its agency in November 2012.
Mr M didn't accept True Potential's offer and he argued the adviser ought to have advised him on any significant legislative changes that might affect his position and took his complaint to the Financial Ombudsman Service.
In a final decision, ombudsman Clint Penfold said: "I am uncomfortable concluding there wasn't an obligation for True Potential to provide ongoing advice and servicing to Mr M.
"Based on a review of Sipp statements, it appears True Potential received over £2,000 in fees but provided no advice or service to Mr M in exchange for this. This doesn't feel fair and reasonable to me.
"Because True Potential received fees on an ongoing basis – and that its adviser knew this – I think, as a matter of good industry practice, a yearly review should have been offered to Mr M. This likely would have included completion of a fact find document."
True Potential was ordered to calculate the notional lifetime allowance charge that would apply if Mr M crystallised any uncrystallised pension benefits now, assuming he takes the excess between £1.302m and £1.5m as a lump sum and a tax charge of 25 per cent is applied.
True Potential must then pay Mr M that amount plus £250 for the trouble and upset it caused.
emma.hughes@ft.com
