Tenet Connect has been told to compensate a client who ended up with a five-figure tax bill because his adviser was ill.
The client, referred to as Mr T, was under threat of redundancy and made an appointment to see his adviser in early February 2016.
He was advised to commission a thorough review of his finances to ensure he was fully prepared financially ahead of any actions before, during and after his retirement.
Mr T said he had told his adviser in a meeting he would be able to negotiate his leaving date and specifically asked for advice on two issues.
He asked whether he should make a one-off pension contribution to his defined contribution scheme through an annual bonus waiver in March 2016 and whether he should take advantage of a once-a-year opportunity to reduce his defined benefit pension accrual from July 2017.
The client said that, after chasing his adviser for advice on the one-off pension contribution, he was told it was OK to proceed so he paid about £10,000 into his pension.
But Tenet Connect's report appears to have been delayed due to the adviser’s illness.
Mr T said he had to chase the report on a number of occasions and because it was late, he didn’t receive advice on whether to reduce his defined benefit pension accrual from July.
So he didn't make any change to his pension contributions.
Mr T received a report from the adviser in August 2016. This said that he wouldn’t incur any annual allowance charges.
Relying on this, he finalised his redundancy date as the end of February 2017.
But he subsequently checked the report more carefully and discovered that the report was incorrect.
Mr T sent some revised figures to Tenet Connect and, following discussions, the adviser reissued the report.
The adviser's revised report appeared to be based on Mr T’s figures and stated there may be a small annual allowance charge of about £1,150.
Mr T retired in February 2017 and in March 2017 he contacted his pension scheme to get the actual 2016 to 2017 pension savings figure for his tax return.
He was told the figure was much larger than he was expecting, due to an additional state pension enhancement applied by the pension scheme.
This meant his payments exceeded the annual allowance by a greater amount than he had expected and he incurred a larger annual allowance charge of about £14,000.
Tenet agreed there had been errors in the report, and a delay in producing it.
Tenet offered to waive the fee charged and to pay Mr T £250 compensation for the trouble he had experienced.
But Tenet didn't agree it should pay the annual allowance charge.
At this point the ombudsman stepped in and Tenet Connect argued Mr T should have sought advice elsewhere given the delays he encountered.
However the ombudsman ruled Tenet should have to pay the additional tax liability he incurred.