The Pensions Ombudsman has sided with Prudential on a dispute with a client concerning mandatory advice on a pension switch.
The ombudsman said the provider had been right to insist the client received professional financial advice before switching his pension to initiate income drawdown.
However, it held the client was given conflicting information which had caused unnecessary delays.
Problems started when in December 2018 Mr R requested a lump sum payment and monthly income drawdown from his pension which he held with Prudential.
Prudential wrote to Mr R the following month asking him to get in touch with the firm so it could discuss his request and told Mr R his fund value was just under £26,600.
In February, Mr R met with a financial adviser from Prudential as part of the process to access his pot.
The adviser asked the client for more information relating to other pension policies he held and told Mr R it would not be possible to release any of his funds until this information was provided.
But Mr R queried this request and the £700 advice fee he had been charged.
In March Prudential told the client that his plan did not facilitate income drawdown and so he would have to switch his pension to either a new plan or provider.
However, to switch to another plan with Prudential, Mr R would need to obtain financial advice which would require him to disclose any additional pension holdings so that the adviser could “give the best advice possible for now and the future”.
Mr R then complained to the provider, claiming his plan “was being held at ransom” and that the process was taking too long.
Prudential refuted the complaint saying it was unable to provide advice without information on other pension plans held by Mr R as this was in line with its own procedures as well as those set by the Financial Conduct Authority.
It then said Mr R could access his pension benefits without advice but he would have to take full responsibility for this, even if the decision made was unsuitable.
However, when Mr R went to proceed “with all risks accepted”, Prudential went back on its word and said income drawdown could only be accessed on receipt of advice from either Prudential or another independent adviser.
Mr R complained about the contradictory information and further reiterated he was not prepared to provide any extra information.
An adjudicator at the Pensions Ombudsman decided that Mr R’s complaint against Prudential’s requirement for advice could not be upheld as advice was required by legislation.
The pensions act 2015 requires that where a member has subsisting rights in respect of safeguarded benefits, the trustees must check the member has received appropriate advice before making a relevant transaction. This applies to pots worth more than £30,000, which Mr R's could have been when taking into consideration the guarantees.