Financial Ombudsman Service  

Adviser calls out ‘ridiculous’ Fos decision

Adviser calls out ‘ridiculous’ Fos decision

An adviser has criticised a recent Financial Ombudsman Service (Fos) decision that resulted in Scottish Widows paying its client's overseas transfer charge, claiming it paves the way for more claims.

In a Financial Ombudsman Service (Fos) decision out this week, a client of Scottish Widows complained after the proposed transfer of his pension plan to a qualifying recognised overseas pension scheme (Qrops) became subject to the 25 per cent overseas transfer charge, even though he had made the request before the charge came into effect in March 2017.

HMRC guidance says transfers requested before the March deadline were not liable for the overseas transfer charge.

The dispute centred on whether or not the client's request to transfer had constituted an official request as opposed to a casual enquiry.

The ombudsman ruled it had and that Scottish Widows should take on the cost of the charge as well as pay the client £100 for the trouble caused.

But Mike Lacey, partner at Berkshire-based financial adviser firm Bowman Pension Consulting, criticised the decision.

Mr Lacey said: “The Fos ruling that Scottish Widows should have to pay the overseas transfer charge is ridiculous. 

“An instruction to Scottish Widows to pay the charge will incentivise the client to transfer when he may not have made that decision if the charge had been payable from the policy.”

He also warned there could be more claims of this type being brought by CMCs.

Mr Lacey added: “Somebody at Fos has made a very poor decision here, which will have the claims management companies rubbing their hands with glee.”

He claimed that CMCs will now be able to trawl through Qrops clients asking if they’ve had to pay the overseas transfer charge as they can point to the Fos ruling to show clients that they may be able to reclaim it.

But others in the industry said because the case is isolated and the take up of Qrops is low, the majority of people will not be in the same situation. 

Ricky Chan, director and chartered financial planner at IFS Wealth & Pensions, said: “I think this case is more of an isolated/one-off type of incident, where the Fos felt that Scottish Widows misinterpreted the rules about the Qrops transfer being chargeable.

“Unless there were many incidences like this where providers misinterpreted the rules and delayed the Qrops transfers, I don’t think there are many people affected so CMCs wouldn’t bother here.”

Ivor Harper, director at Park Financial agreed there wouldn't be many claims off the back of the Fos decision.

Mr Harper said: "There is, I suspect, a brief window in time when similar cases might have arisen.

"I strongly doubt CMC owners will be affording to buy themselves a huge Christmas goose off the back of this meagre line of claims."

Martin Tilley, pensions director at Hurley Partners, agreed this would not be an area for CMCs as individuals could easily bring the claims themselves.