The Financial Ombudsman Service has decided that a claims management company was right to charge a 40 per cent fee for its work on a pension claim, despite the fee eating away half of the claimant’s pension fund.
A client of claims management company Goodwin Barrett complained after high fees meant that he lost more than £17,000 of his pension pot after bringing a successful claim with the Financial Services Compensation Scheme.
The individual, who the Fos called Mr J, had been advised to transfer his pension into a self-invested personal pension but shortly after the provider went into liquidation and Mr J was worried that he wouldn’t get any of his money back.
He approached Goodwin Barrett who put in a claim to the FSCS on his behalf.
The claim was successful and the compensation awarded totalled £36,000, which Mr J said was the amount he had held in his pension.
Goodwin Barrett charged its success fee of 40 per cent plus VAT but Mr J argued this was unfair as half of his pension would now go towards paying the fees.
Mr J said he believed the fees would be charged on any compensation received above his pension value.
But the Fos found Goodwin Barret had acted fairly when charging its fees as Mr J had been made aware of the fee set up before the claim was submitted.
Ombudsman Charlotte Wilson said: “Mr J’s pension was worth less than £100 when he made his claim. After Goodwin Barrett submitted a claim on Mr J’s behalf, he received a refund of over £36,000.
“As this money was the refund, it follows that Goodwin Barrett charged its fee on this amount and Mr J was given the remainder of around £19,000. I’ve not seen anything to suggest that Goodwin Barrett have acted unfairly in taking its fee.”
But she accepted Mr J may have been confused as to what money this fee would be payable for and because of this has experienced a loss of expectation.
Mr J said that the fee would be payable on “new money” and so he took this to mean money recovered above his pension contributions.
But Ms Wilson said because Mr J’s pension was worth less than £100 at the time he instructed Goodwin Barrett, it’s likely the “new money” that was referred to means any money recovered over and above the current value.
Ms Wilson said: “Mr J understood that he’d be paying a fee on a smaller proportion of his refund. So it would’ve been a shock to him that Goodwin Barrett will be taking almost half of his pension refund.
“Although I think Goodwin Barrett have acted fairly in taking this fee – as it is in line with its terms which were made clear to Mr J – I do think the confusion after Mr J’s call has caused Mr J some trouble and upset.”
Therefore she decided that Goodwin Barrett should pay £300 to Mr J for the trouble and upset caused.