The client, dubbed Mr H, was advised by his financial adviser to switch his two existing Royal London personal pension policies into another plan, which would allow him to start income drawdown as he was planning to take early retirement in 2017.
While the transfer of the first policy occurred without any issues, the second was delayed by a total of 121 working days.
Pension switches, as opposed to pension transfers, don't need advice to go ahead so the client could have easily switched his pension had Royal London not issued a series of mixed messages which ended up delaying the process for almost six months.
Mr H received the necessary pension switching forms in January 2018 after an initial delay of nine working days following his adviser’s request in late 2017.
A Royal London representative called Mr H on January 26 and advised that he could complete the transfer on a non-advised basis, but the client said he had now received the forms and would complete them.
The representative then said Mr H's adviser would need to sign a declaration that they had given financial advice before the transaction could be completed, and the transfer request was on ‘hold’ until that was done.
Royal London then received an electronic request to transfer the policy on April 30, and the adviser had also sent paper discharge forms on May 1, which were accepted.
Royal London advised again, on May 30, that the letter confirming that financial advice had been given was still outstanding.
Finally, on July 24, when asked, the mutual insurer stated that it did have all the paperwork necessary, as the confirmation of financial advice that it had been waiting for was not actually needed after all.
The transfer request was resubmitted and the payment was made the following day.
Ombudsman Keith Taylor accepted Mr H's complaint, who said the delay had caused him stress and financial difficulty, as he had been unable to access the funds via his drawdown policy during that time.
The Fos found the second delay had been caused by the incorrect information given to Mr H on January 26 by Royal London - that confirmation of advice was required before the transfer could be completed, which was not recognised to be incorrect until July 24.
Royal London has been ordered to calculate compensation to Mr H, despite the mutual insurer stating his plan had increased in value over the period before it was transferred.
The insurer must establish the transfer value of the pension policy had the transfer taken place 121 days earlier, which is the notional value.
Then, it will need to apply index growth to the notional transfer value to the actual date of transfer (a period of 121 days), which will be the fair value.
The loss will be the difference between the fair value and the actual value. If actual value is greater than the fair value, then no compensation is payable.
Royal London should add interest to these calculations, and pay Mr H £300 for the distress and upset caused by the delay, the Fos ruled.
maria.espadinha@ft.com
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