An advisory firm has been forced to pay £14,866 for failing to properly monitor a disgruntled client’s pensions arrangements.
The Financial Ombudsman Service found Michael Davey Financial Management (MDFM) did not properly monitor a client’s pensions arrangements against the lifetime allowance (LTA).
The judgment was outlined in a final decision by ombudsman Kim Parsons.
In the five-paged verdict, she explained how the gripe began when the client – referred to as Mr H – complained that he had lost out financially because MDFM failed to properly monitor his pensions arrangements against the lifetime allowance.
He claims as a result, he had to pay a tax charge of £87,376 and believes he should not have incurred this tax liability.
Mr H said that had MDFM advised him of the allowance situation in November 2015 and advised him to take his benefits immediately then no tax charge would have arisen on the growth element of the fund between then and July 2016.
He was a 20 per cent tax payer at the time of his retirement and has remained so for each of the years since then.
He therefore believes the appropriate tax rate to be used is 20 per cent. And even if he had exceeded it, the higher tax rate would have only applied to part of his income, not all of it.
Although MDFM admitted blame in full on several occasions, the firm did not offer proper compensation from the outset, and only increased its offers over time.
The issue was bought to Fos due to problems in agreeing on an appropriate amount for compensation.
Ombudsman Kim Parsons said: “MDFM calculated Mr H’s loss to be around £14,866.
"This is not far off the £14,850 calculated using Mr H’s preferred methodology.
"So, I think either way a compensation payment of £14,866 is a fair outcome.”
