Financial Ombudsman Service  

SJP to compensate wife of partner over 'unsuitable' pension advice

SJP to compensate wife of partner over 'unsuitable' pension advice
St James's Place

The Financial Ombudsman Service has told St James's Place to compensate the wife of one of its partners after she suffered a loss to her pension when transferring it.

The complainant, Mrs B’s husband, was a self-employed financial adviser and a partner of SJP at the time, thereby an appointed representative of the company. 

In July 2002, Mrs B moved her personal pension with guaranteed annuity rates to an SJP pension plan but, after comparing the benefits she had given up in her old pension, she complained to SJP that she should not have been allowed to make the switch.

This was because of a loss related to the guaranteed annuity rate, likely to be around 11 percent if compared to her former colleague and co-director who retained the original scheme.

Mrs B complained to SJP that she shouldn’t have been allowed to switch her former pension to SJP in light of the lost guaranteed annuity rate.

At issue was whether the transfer could be deemed execution-only or advised - in part due to the fact SJP allows its partners to process pension switches on an execution-only basis due to their qualifications. Mr B recalled that he was advised by SJP that his wife's pension switch could be processed on the same basis.

Ombudsman Gary Lane said: "The issue in dispute is the way in which Mrs B’s pension switch was arranged. SJP has explained that the switch was an execution-only transaction. Which means that it doesn’t consider that it provided Mrs B with any recommendation regarding the suitability of the switch."

He continued: "I can understand why such a scheme may be a benefit extended to partners, who were advisers. It would not be unreasonable for SJP to assume that its appointed representatives could make informed decisions for themselves. 

"So it would seem counter-intuitive to expect an adviser to formerly make and record a recommendation to themselves. Or to be compelled to obtain independent advice from an identically qualified colleague. And it may not be unreasonable to suppose that the adviser, based on their own knowledge, would then assume responsibility for the suitability of their decision."

He continued to say that Mrs B, as the spouse of an SJP adviser, didn’t appear to have specific financial planning and so could not be assumed to be able to possess the insight that an SJP partner would. 

"Without being able to see any documented policy, it seems likely to me that, this partners scheme relied on the understanding that the SJP partner was qualified to suitably advice his or her spouse. In which case, it relied on the assumption that Mr B was able to assess whether the switch was suitable.”

SJP said Mr B was responsible for having failed to properly identify the issues with his wife's pension switch, but Lane said that since he was acting as an SJP appointed representative, the company was responsible for his advice and therefore it should compensate her.