Adviser loses Fos case over DB transfer he 'sold to himself'

The complaint was made by a Mr M and related to a decision made in 1990 to transfer the benefits from his own DB occupational pension scheme to a personal pension. 

At the time, Mr M was an adviser with a business that is now part of Zurich Assurance.

According to the Fos, records show that Mr M was a trained adviser at the time and that he personally received the commission for the transfer complained about. 

Paul Featherstone, the ombudsman who made the ruling, said: "Zurich has provided evidence, which indicates that Mr M was the adviser who carried out the transfer and sale of his personal pension – he effectively sold it to himself.

"Zurich’s supporting evidence is that Mr M received commission for the sale. I think the evidence that Mr M is the adviser recorded as having received commission for the sale, is persuasive evidence that he carried things out himself.

"If he had received advice from someone else, I think it’s reasonable to assume that their name would’ve been the one recorded as having received the commission instead."

Mr M claimed he was a trainee adviser at the time and that his training had been "rushed". He also claimed he was acting as an employee rather than in his own capacity when he transferred his pension.

The complaint

Mr M complained to Zurich in 2021 about the suitability of the advice he received to transfer around £6,300 from his DB pension scheme to a new personal pension scheme. 

At the time of the transfer Mr M was aged 26 and was a financial adviser with the business and was licensed to advise on personal pensions. 

Mr M's recollection is that he was approached by his manager at the time about taking advice on his pension and was told transferring would be the best option for him. 

He said he transferred his pension based on this and was not aware of the implications it would have on his retirement as he was only a trainee adviser at the time.

His complaint was not upheld by Zurich, which said it did not have any of the documentation from the time of the sale. 

It did note that its records showed Mr M was a fully trained adviser when he sold the pension plan to himself and as such it believed he had the appropriate knowledge. 

Mr M referred his complaint at first to a Fos investigator who said it shouldn't be upheld. Following this, it was passed on to the ombudsman who also decided it shouldn't be upheld.

The reasoning for this was the evidence from Zurich showed that Mr M was a trained adviser at the time. 

In addition to this, it noted that the pension transfer was completed during the period of the pension review - the industry wide review which looked at pension transfers between April 1988 and June 1994 – and in 2011 Zurich confirmed to Mr M’s advisory firm that his pension did not qualify for a review because no advice was given.

Zurich said because Mr M did not challenge this at the time, it suggested that he accepted he transferred the pension on his own accord. 

On top of this, the Fos investigator said they felt the transfer was likely in Mr M’s best interest from a financial viability point of view, and that overall they did not think the transfer was unsuitable. 

Mr M disagreed with the Fos investigator’s decision and maintained that as he was new to the financial services industry at the time, and he did not have sufficient knowledge or experience to advise on a pension transfer at such an early stage in his employment. 

Mr M noted that he had only completed his training about six months prior to the transfer and that his training was “rushed”. 

Furthermore, he said he was “coerced into transferring away by his supervisor to meet company targets”. 

Featherstone added: "I think it’s reasonable to assume that Mr M would’ve possessed a reasonable amount of knowledge about personal pensions. And in my view, likely a greater level and depth of knowledge about the subject matter than the typical consumer at the time.

"Mr M might not have had any prior financial knowledge or experience before working as an adviser, and he might only have been recently ‘qualified’ at the time in question. But he was deemed competent by his then employer to advise consumers on personal pensions.

"I think this more likely than not meant that Mr M understood the nature of a personal pension, the associated risks and also the fundamental difference between a personal pension and a DB or final salary pension scheme. I find it implausible that Mr M’s adviser training would not have dealt with the differences of these two types of pension."

jane.matthews@ft.com