The Financial Ombudsman Service has rejected an adviser’s argument that a complaint about a pension transfer dating back to 2001 should be time barred.
Back in August 2001 Charterhouse Independent Financial Advisors recommended transferring the value of a client’s accrued final salary benefits into a personal pension plan.
At the time, the client was aged 44, married with two children and had just started working on a self-employed basis with an annual gross income of £14,000.
He had no assets, savings or investments apart from his main home and two freestanding additional voluntary contribution (FSAVC) plans that he had taken out whilst working for his former employer.
He was recorded as having an attitude to risk that was 70 per cent medium and 30 per cent more adventurous investor.
The benefits in the occupational pension scheme were worth about £127,000 at that time.
In 2008 he was later advised to transfer the PPP into an income drawdown arrangement.
At this point he was working on an employed basis with a different employer and earning £46,000 a year.
His risk profile was recorded as balanced.
Charterhouse advised Mr M to transfer the value of the PPP and his other pension plans into an income drawdown plan so that he could access the tax free lump sum.
The value of the PPP at that time was about £142,000.
Mr M accepted this recommendation and transferred to a new plan taking out the tax free cash sum of over £41,000.
In 2008 the suitability letter stated that the lump sum was to be invested in residential buy-to-let properties.
But Mr M complained to the business in May 2015 about the advice that he received from Charterhouse in 2001 and 2008.
The ombudsman ruled given his circumstances in 2001 Mr M was not able to bear any losses associated with the transfer and therefore the advice was unsuitable.
The ombudsman added Charterhouse should have considered Mr M’s capacity for loss and whether he could take on the risks associated with the proposed pension transfer.
The ombudsman went on to say that in his view, if Mr M had been advised not to transfer in 2001, suitable advice in 2008 ought to have been to leave the deferred pension benefits within the OPS.
But Charterhouse argued the complaint had been made outside the time limits allowed under the rules under which the Financial Ombudsman Service operates.
However the ombudsman rejected Charterhouse's argument the complaint should be time barred and stated it was one the service could investigate.
Ombudsman Adrian Hudson said: "The Financial Ombudsman Service can investigate the merits of both sets of advice given to Mr M. I do not consider the complaint is time barred.
"The business has argued (and I agree) that an individual will rarely leave a secure well paid job to be self-employed if they believe at the start that the new business venture will fail. It may take some years to establish after which Mr M might be in a position to make further contributions but this was not certain.
"However, it is the case here that the deferred pension represented a significant guaranteed benefit to fall back on in the event that the new business venture was not successful.
"In my opinion if Charterhouse had properly taken into account his circumstances it should have advised Mr M not to transfer his deferred benefits to a PPP in 2001 but should instead have recommended that Mr M wait and see how the new business progressed."
The ombudsman ordered Charterhouse to put the client back into the position he would now be in but for the unsuitable advice he received in 2001 up to a maximum of £150,000.
emma.hughes@ft.com
