An advice firm involved in the British Steel transfer debacle has been told to pay out after the Financial Ombudsman Service (Fos) found its advice was “insufficiently compelling” and the transfer should not have gone ahead.
The Fos concluded that advice firm Argent Wealth gave unsuitable advice as it was unlikely that the benefits available from the British Steel Pension Scheme (BSPS), or the Pension Protection Fund, could be outmatched by going ahead with a transfer.
Ombudsman Philip Miller ordered the firm to put the client as closely as possible into the position he would be in had it not been for the unsuitable advice, up to a maximum of £160,000.
In July 2016, a steelworker who the Fos called Mr D sought advice from Argent Wealth regarding his options for his deferred pension benefits in the BSPS.
Mr D had a normal retirement age of 65, at which point Argent Wealth estimated that he could expect an annual income from the scheme of £24,592.
He received a cash equivalent transfer value (CETV) for his deferred benefits of £251,530 in July 2016.
Mr D had several priorities which included retiring early and repaying his mortgage with the maximum tax free cash, flexibility of accessing his funds through drawdown, and improved lump sum benefits for the benefit of his sister.
Argent Wealth said it had recommended to Mr D to transfer his BSPS benefits to a new wrapper so he could achieve these aims and because he was concerned about the financial future of the BSPS.
Mr D accepted the recommendation and transferred his BSPS benefits but he later complained that the advice was unsuitable, and that it had failed to take into account the regulatory requirements in place when the advice was given.
The Fos found the possibility of an early retirement was a repeated theme throughout Mr D’s dealings with the adviser .
But, it was not specifically stated at what age Mr D was planning to retire, which the Fos said should have happened so that a proper comparison could have been made between the likely pension Mr D could have expected from the BSPS or the PPF.
In addition, Mr D was recorded as wanting to take the tax free cash for the purpose of repaying his mortgage and loans, but to defer income until a later date.
But there was no suggestion that he was experiencing difficulty in making repayments.
The Fos found that even with immediate retirement in 2016, he could have expected a lump sum of £51,453, with which he could have repaid the majority of his mortgage and loan debt, and had leftover income of £7,718 per year.
Miller said: “Therefore, given that Mr D’s income requirements are likely to have been met by early retirement within the scheme in 2018, if not before, I don’t think this was sufficient reason for him to transfer away from the BSPS.”
Regarding Mr D’s concerns about the funding of the scheme, a single line was recorded by Argent Wealth which said - “You are concerned that your British Steel scheme funding status is in deficit.”