Defined Benefit 

Pension transfer advice from 22 years ago costs adviser

Pension transfer advice from 22 years ago costs adviser

A Blackpool-based adviser has been told to cough up compensation for advising a client to transfer his occupational pension to a Section 32 buy-out plan 22 years ago.

Back in 1997, when former prime minister Tony Blair promised things could only get better and the Labour Party ended its eighteen-year spell in opposition and won the general election with a landslide victory, a client referred to as Mr C approached James Brearley & Sons Limited for advice in relation to the transfer of his occupational pension scheme.

The scheme retirement age for his pension was age 60 but he wanted to retire aged between 50 and 55.

James Brearley arranged for Mr C to transfer his pension to a section 32 buy-out plan which would allow him to access his pension from the age of 50.

But in 2017, Mr C complained to James Brearley.

He had turned 55 and enquired about taking his pension commencement lump sum.

His pension provider said that there was a shortfall in the guaranteed minimum pension benefits, and estimated that benefits under the policy would not be available until he reached 65.

James Brearley rejected the complaint and stated their adviser had followed the advice process at the time.

The IFA added Mr C had since changed advisers so it would’ve been the new adviser’s responsibility to review his circumstances.

However when the Financial Ombusdman Service stepped in they ruled James Brearley was wrong to advise Mr C to ditch his occupational pension and give up valuable guaranteed benefits.

The ombudsman ruled James Brearley failed to make Mr C reasonably aware of the risks associated with the transfer, mainly the fact that he may not be able to retire early if GMP benefits were not met.

Considering Mr C's main goal for transferring was so that he could retire early, the ombudsman found the adviser didn’t put Mr C in a fully informed position.

But James Brearley argued Mr C acknowledged his understanding of the risks when he signed a transfer declaration which was issued by his occupational pension.

The adviser also argued it hadn’t provided Mr C with any advice, and simply presented him with the options in relation to his occupational pension as he had requested.

Ombudsman Keith Taylor said: "There is very little evidence available from the time of the advice. There is the transfer analysis report but no suitability letter and so it's not clear exactly what advice Mr C was given.

"However, James Brearley did arrange the transfer and charged for its advice. And so overall I am satisfied that advice was given.

"The transfer analysis doesn’t appear to make any comparison of the returns needed to actually achieve the early retirement Mr C wanted. So he can’t have been fully informed. Overall, I'm not satisfied that the transfer was suitable for Mr C or in his best interest.

"He was giving up valuable guaranteed benefits in exchange for benefits that were subject to the risk of investment performance."