Prudential  

Pru to pay back adviser fee after transfer delay

Pru to pay back adviser fee after transfer delay

Prudential has been made to pay back a £5,000 adviser fee to a client after it caused a delay to his pension transfer.

The Pensions Ombudsman ordered Prudential to pay the adviser fee alongside three months’ simple interest on a £100,000 tax-free cash lump sum which was not taken after the pension transfer failed to complete in a timely manner.

The issue started in September 2018 when the client’s adviser applied for a defined benefit transfer and sent Prudential the required paperwork.

The client, who the PO called Mr Y, had a cash equivalent transfer value of £2.83m at the time which was guaranteed until September 15.

According to its service level agreement, the provider had five working days to send Mr Y’s completed discharge forms to the ceding scheme Equiniti.

But Prudential failed to do this and as Equiniti did not receive the paperwork before the CETV deadline it had to be recalculated.

In December 2018, Equiniti issued Mr Y with an updated CETV of £2.76m, £62,694 lower than the original.

Prudential accepted responsibility but said to determine whether Mr Y had been financially disadvantaged by the delay he would have to complete the transfer as soon as possible.

It also said it would compensate him for any distress and inconvenience.

Mr Y was not happy with this response and said the provider should make a one-off payment to cover the shortfall between the two CETV values, the loss of growth from his pension pot, interest payments on the money he planned to withdraw and loss of personal allowance usage.

But in November 2019, Mr Y transferred the pension to Aviva and accepted that pension growth or loss could no longer be calculated or refunded by Prudential.

Mr Y was supposed to receive his £100,000 tax free pension commencement lump sum in September 2018 but due to the delays it was not made available until November 2019.

Therefore, he said, as Prudential was responsible for the 14-month delay it should pay 8 per cent interest on the £100,000 as redress.

Mr Y also complained he had been unable to use his 2018/19 tax allowances and had lost the chance to take £11,850 at 0 per cent and £34,500 at 20 per cent and therefore the provider should pay for the tax impact.

Mr Y’s advisers also increased the transfer charge to £20,000 from the original £15,000 and he claimed Prudential should pay the difference.

Prudential contested Mr Y’s demands saying it should not pay the full 8 per cent interest for 14 months as these delays were not its responsibility, but it would pay the interest for three months.

Ombudsman’s decision

Ombudsman Anthony Arter found although the timescale was tight for Prudential to send the discharge forms to Equiniti before the CETV expired, the provider still failed to meet its service level agreement and Equiniti would “more likely than not have received the completed forms in the post before the CETV guaranteed period expired”.