Financial Ombudsman Service  

Adviser to pay out on 2008 pension advice

Adviser to pay out on 2008 pension advice

Sesame has been told to compensate a pair of clients over unsuitable advice despite the ombudsman finding the couples’ woes could not be blamed on the adviser.

Two clients of Candour Independent Financial Advisers, an appointed representative of Sesame at the time, complained to the Financial Ombudsman Service that unsuitable advice to switch their pension had left them out of pocket and unable to pay their mortgage.

The clients, who the Fos called Mr and Mrs S, both held with-profits pension policies that included guaranteed annuity rates but in 2008 Sesame, through its appointed representative, recommended them to switch to a different policy with another provider.

The pension values, of which Mr S had £23,866 and Mrs S had £2,737, were then invested into a mixture of different funds with a higher degree of risk but which had performed better than their old policies in the previous few years.

At the time of the advice in 2008, Mr S was 59 years old, self-employed and earned £1,500 per month. He also had a small occupational pension. Mrs S was 56 years old and unemployed. The couple had no dependants.

In 2012 the couple met with the adviser again and Mr S decided to take his benefits after he was informed he did not have to wait until age 65 to access his pension as he had previously thought.

Both Mr and Mrs S were unemployed at that point. Their income included pension credit, a small occupational pension for Mr S, state pension benefits and a small industrial injury payment for Mrs S. 

Mr S received a tax free cash lump sum and with the rest of the pension fund he bought an annuity, paid monthly in advance, without escalation, with a 10-year guarantee and a 50 per cent spouse’s pension. 

Mrs S had cashed in her policy earlier that year and received £2,800.

Then in 2015, when they contacted the pension provider to inquire about Mr S’s policy, they were told the policy had ended in 2012 when Mr S had taken a tax-free cash sum and bought an annuity.

The couple said the advice they received from Sesame wasn’t in their best interest as they lost valuable guarantees when they switched their pensions in 2008 and were led to believe in 2012 that they would still have a pension pot to cover their outstanding mortgage balance. 

They also argued the adviser should have told them that taking an annuity would impact on their benefit payments.

The ombudsman heard how the couple didn’t have the funds to cover their remaining mortgage balance when the mortgage ended and in 2018 the bank started repossession proceedings.

The couple said the adviser had known about their circumstances and that their mortgage would have been a priority. 

They received limited advice on their pension in 2008 and 2012 but said they needed unrestricted financial advice making sure their mortgage was covered. 

They claimed they did not need another small annuity income in 2012, but would have needed a pot of money to pay off the mortgage when the term ended.