Redmayne-Bentley has been told to pay redress for advising a client to transfer a defined benefit (DB) pension to a self-invested personal pension (Sipp) despite the firm not being authorised to advise on this type of transaction.
In a Financial Ombudsman Service (Fos) decision, investment manager Redmayne-Bentley was told to pay compensation after a client complained that the firm advised him to transfer his DB pension to a Sipp and he lost out as a result.
The client, who the Fos called Mr C, had been a member of his former employer’s final salary scheme for over 12 years until he was made redundant in 2005.
In 2010 he met with a friend, an adviser at Redmayne-Bentley, who “persuaded” him to transfer £37,000 in pension benefits to a Sipp to "enhance" the amount of pension benefits available on retirement.
Mr C signed an application form to transfer the value of his benefits to a Sipp, with the form outlining that if the transfer was coming from a DB scheme advice was required from a pension transfer specialist.
Mr C's friend held the relevant qualification but the firm did not have pension transfer advice permissions.
Mr C said his friend had produced a list of stocks to buy for which he would then place the instructions to buy and sell through Redmayne-Bentley.
He said that everything was done on an informal basis and when the adviser left the firm in January 2011, Mr C still had the list with suggested investment so placed some himself.
Mr C then complained that his Sipp had lost money as the selected investments performed poorly. He was also unhappy that he had lost the guaranteed benefits provided by the DB scheme.
Redmayne-Bentley does not accept that its now former employee gave advice arguing that on his application form Mr C confirmed he had not received advice.
An adjudicator from the Fos found that Mr C did not have sufficient pension knowledge to make his own decisions and said the fact he transferred into a Sipp connected with Redmayne-Bentley showed that it was likely that this was discussed with one of their employees.
It also found that although the employee held a CF30 controlled function, which allowed him to offer pension transfer advice, he should have told Mr C to seek formal financial advice.
Redmayne-Bentley argued that the application form had asked if the source of the pension transfer was a final salary scheme to which Mr C had answered no, therefore the firm was in no position to question his answer.
It also said that even though the employee had a CF30 controlled function, Redmayne-Bentley did not have this permission on a firm level so the employee was not permitted to give pension transfer advice.
However, the firm was able to facilitate the transfer as it was before April 2015 when rules were introduced by the Treasury that advice must be taken for a DB transfer worth more than £30,000.
Even though it did not accept liability the firm offered Mr C £30,000 to resolve the complaint.
The ombudsman ruled that if the forms had been reviewed by Redmayne-Bentley it would have realised that the transfer value was coming from a large UK based company and the firm should have checked whether the pension was a DB scheme before accepting the transfer.
Ombudsman Adrian Hudson said: “It is apparent in this case that Mr C was not a pension expert and he had little idea of what type of pension scheme his former employer had been providing.
“I do not think that in the circumstances Redmayne-Bentley can rely on an individual such a Mr C to be aware what type of occupational pension scheme the former employer arranged for its staff.”
He added: “It is clear that Redmayne-Bentley was aware that if the transfer was coming from a final salary occupational pension scheme that it would not accept the transfer value on offer on an execution only basis.”
The ombudsman said that the firm should have declined to accept the transfer in which case Mr C would have kept his deferred benefits in his DB scheme.
The Fos asked independent actuaries to determine the critical yield in Mr C’s case and this showed that a return of over 9 per cent would be needed to match the benefits that were being surrendered.
Redmayne-Bentley was ordered to carry out a redress calculation to put Mr C in the position he would have been in had the transfer not occurred.
amy.austin@ft.com
What do you think about the issues raised by this story? Email us on fa.letters@ft.com to let us know.
