Defined Benefit  

Decade-old pension transfer advice costs adviser

Decade-old pension transfer advice costs adviser

Decade-old pension transfer advice has come back to haunt JP Financial Management Ltd and resulted in a potentially six-figure compensation bill.

As the financial crisis hit back in 2008 a JPFM adviser recommended a married father-of-two, referred to as Mr T, transfer his pension benefits into a self-invested pension plan (Sipp).

JPFM claimed the client got in contact with their adviser because his employer had decided to close the defined benefit pension and he wanted to take the enhanced transfer value on offer.

JPFM pointed out Mr T completed a form to this effect before he had even met their adviser but when the client complained to the Financial Ombudsman Service the business was unable to find this piece of paperwork.

Despite this form being missing the intermediary argued they knew their adviser was introduced to Mr T to just advise on the next steps.

JPFM argued if Mr T now felt his decision to leave the defined benefit scheme was wrong, he should direct his complaint to his former employer and their advisers.

But at a time when Lehman Brothers was going bankrupt, Mr T argued he remembered there were funds from other pension schemes transferred into the Sipp on JPFM's advice.

While Mr T was unable to remember the exact date of these transfers, he said this action was taken to consolidate his funds in a single scheme.

In his final ruling on the complaint, ombudsman Doug Mansell said he felt it was likely that Mr T approached JPFM for advice on what was the best option for him.

Mr Mansell said: "I don’t doubt that Mr T was considering the option to transfer away from the scheme, and may well have been influenced in this by the enhanced transfer value that was being offered. But I've not seen evidence he'd made any final or irrevocable decision to do this.  

"The suitability letter the adviser sent Mr T refers to the options offered by the DB scheme. It says that before discussing the options and making a recommendation, the adviser asked Mr T to complete a financial priorities questionnaire.

"This gave the adviser an insight into Mr T's thoughts regarding the DB scheme.

"Again, there’s nothing here to suggest Mr T had already decided he wanted to transfer away from the scheme. But even if I accept that Mr T had expressed such a wish, JPFM was still obliged to give him suitable advice.

"So it should have ensured that proceeding with the transfer was suitable for Mr T in light of his circumstances and requirements.

"Although it’s the case that some final salary schemes do fail, there are provisions in place to protect scheme members. And while the scheme was being closed in 2008, I’ve not seen evidence it was in danger of failing."

JP Financial Management Ltd was ordered to put Mr T into the position he would now be in but for the unsuitable advice and was told if this was greater than £150,000, they should also pay the balance.