PropertyMay 22 2017

Adviser must payout on 'execution-only' pension transfer

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Adviser must payout on 'execution-only' pension transfer

The Financial Ombudsman Service (Fos) has upheld a complaint against Legacy Wealth for unsuitable pension advice that prevented a client from retiring as expected.

The complainant, known as Mr H in the decision, had invested in commercial property through a self-invested personal pension when he left his former employer’s scheme.

The property investment underperformed, and Mr H was unable to retire at 55 as hoped.

Mr H was advised to transfer out of his employers scheme into a Section 32 pension plan with Axa in 1997.

In February 2007 he was told to transfer to a personal pension and the adviser also sent some information about the commercial property investment.

The adviser sent Mr H a report with his recommendations explaining why Mr H should transfer his Section 32 pension to a personal pension and recommending he invest 25 per cent in property based on his “moderate to speculative” views about risk.

It assumed that £100,000 would be invested directly in property through a Sipp.

On 17 April 2007 Mr H sent an email to the adviser asking if he could use Sipp to buy commercial property and rent back.

The adviser wrote to Mr H on 30 April 2007 asking him to sign forms to confirm that the investment in Queen Street was on an execution-only basis and no advice had been given.

Another form confirmed that Mr H was a sophisticated investor.

These forms were all signed and dated 30 April 2007.

The application forms for the investment and the personal pension were also signed on the same date.

Mr H emailed the adviser on 7 April 2010 noting the recent poor performance of his fund and asking the adviser how his pension was performing overall and how the downturn in the property would affect his plans to retire in June 2011.

Legacy gave advice in June 2011 to transfer the personal pension to the Sipp.

This was to allow another £7,000 to be invested in commercial property.

The remaining £47,000 was to be invested on a fund platform.

Mr H wrote to Legacy on 16 March 2013 stating: "I believe this property investment through my pension has been pretty disastrous and I am not quite sure what can be done with it.

"Of greatest disappointment is the fact that the main purpose of me transferring my scheme from … to one managed by yourselves was to accommodate my desire to be in a position to draw it down at aged 55 and not 63 as with the former scheme.

"I recall my concern at the time was that this investment would not adversely impact my main aim of taking out my funds at age 55.”

Legacy rejected the complaint arguing Mr H was one of a number of clients it promoted commercial property to and he did not receive advice. 

However Fos decided that because Mr H was receiving advice on his pension investments as a whole, Legacy should have given advice and relevant warnings on the property investment as well.

The ombudsman said Legacy must return Mr H to the same position that he would have been in if he had not invested in the property fund, using a calculation that shows how his money would have performed had he invested in the FTSE UK Private Investors Income Total Return index instead.

If this amount exceeds £150,000, Mr H may be able to take Legacy to court for the rest.

A Fos spokesman said that just 0.5 per cent of upheld complaints suggest redress of more than £150,000, which is the maximum the Financial Ombudsman Service can request from any entity.

Legacy did not return calls on Friday.

rosie.murray-west@ft.com