Personal Pension  

Tenet's pension transfer advice branded unsuitable

Tenet's pension transfer advice branded unsuitable

Tenet Connect has been ordered to compensate a client for unsuitable advice to move to a new group personal pension (GPP) provider.

The client, called Mr R by the Financial Ombudsman Service (Fos), lost a significant loyalty bonus from his previous provider after Tenet advised him to move to a new plan being offered by his employer.

Mr R's employer decided to offer a new pension plan to its staff, since the current GPP at the time wouldn't meet qualifying requirements from 2015 onwards as the charges were too high.

For more mature staff with long service, the decision to move to the new scheme was not clear cut due to the loyalty bonus offered by the existing provider.

The bonus was called an extra fund injection (EFI), and Mr R would have to stay with the previous provider to benefit from it.

The EFI to be paid depended on the length of membership and could increase the maturity value by up to 15 per cent.

No bonus would be paid if Mr R left the scheme more than 100 months before the age of 65, so before the age of 56-years-and-eight-months-old.

In late 2012, Tenet Connect advised Mr R to move to the new pension plan, and transfer his existing pension pot to the new provider.

According to the Fos decision, the suitability letter sent to Mr R at the time didn't explain the implications of losing out on the EFI bonus.

The adviser said he felt Mr R would benefit from moving to the new GPP as the charges were less and he would have access to a wider range of funds.

As Mr R was 54-years-old when he moved to the new GPP he lost all his accrued EFI.

The suitability letter stated that, at age 65 and assuming a growth rate of 6.5 per cent, Mr R's pension fund might be worth £230,000 if he stayed with his existing provider but it might be worth £241,000 if he transferred to the new provider.

However, no allowance was made for the EFI in this projection.

In 2015, Mr R complained to Tenet Connect.

He said he didn't think the advice to transfer to the new provider was suitable, as it hadn't taken account of the bonus he would have been entitled to if he had remained with the previous pension provider.

The adviser firm didn't uphold Mr R’s complaint, and the client decided to file a complaint with the ombudsman.

Ombudsman Suzannah Stuart upheld Mr R’s complaint.

She said: "I note that Tenet Connect says it feels the advice Mr R received was suitable. But it hasn't explained why a proper analysis of the 'contrasting charging structures', including the EFI wasn't carried out before Mr R was advised to move to the new scheme.

"It says Mr R could have asked the adviser for this and suggests that the EFI was not an 'overwhelming concern' at the time it advised him to move to the new GPP provider in September 2012.