Drawdown 

Advice given 23-years ago comes back to haunt adviser 

Advice given 23-years ago comes back to haunt adviser 

Pension transfer advice given by BBT Financial Services in 1995 has come back to haunt the advice firm.

In 1995 BBT recommended that Mr B transfer his pension from Clerical Medical to Scottish Equitable because of the future opportunity to take phased withdrawal or drawdown with the provider.

But after a complaint to the Financial Ombudsman Service, the firm has been told to compensate Mr B because the advice was unsuitable.

The ombudsman stated Mr B was not intending to retire and take benefits for about three years and it was uncertain how he would wish to take benefits or what annuity rates would be at that time. 

If Mr B did want the option of drawdown or phased withdrawal then the ombudsman ruled that could have been considered when he took benefits and, if necessary, a transfer could have happened then.

In a final decision, ombudsman David Bird said: "The fact that it was not known when the transfer was made whether drawdown would be suitable for Mr B was a main reason for upholding the complaint. 

"BBT seems to have now confirmed that it could not be known whether that was suitable but advised the transfer for that purpose in any event. 

"There was no reason to transfer at that time when it could not be known what would be appropriate when Mr B retired or what his current pension provider might offer. The advice was not suitable based on what was known at the time."

In the ‘fact find’ completed in 1995, it was recorded that Mr B was: "Looking to retire at age 62, worried about annuity rates wants option of phased/drawdown."

There are only two short letters from BBT, which is in no way connected to Wakefield-based BBT Group, in 1995 to Mr B setting out why it was recommending the transfer. 

This recommendation was made on the basis of giving Mr B the option of phased withdrawal or income drawdown. 

At this time Clerical Medical did not offer those options and it was uncertain whether it would do so by the time Mr B wanted to take benefits. 

BBT argued it could not have been known in 1995 whether income drawdown was suitable or not so the benefit of hindsight cannot be used as a reason the transfer should not have taken place. 

The firm argued the advice was suitable based on what was known at the time. 

But the ombudsman ruled even if the client had hoped to take his cash in 1997, the advice would remain unsuitable. 

BBT Financial Services was ordered to compare the value of Mr B’s Scottish Equitable pension benefits as at the point he entered income drawdown with their value if he had retained them at Clerical Medical. 

If the Scottish Equitable value was less than the Clerical Medical value would have been in 1998 then this difference is the loss amount. 

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