The case related to advice given by Booth & Associates, an appointed representative of Investment Strategies (UK) Ltd prior to its dissolution, on a pension transfer which completed in 1998.
Old Mutual Holdings Limited, which later became Quilter, took on responsibility for the advice following the dissolution.
The Fos said therefore Quilter is responsible for the advice being complained about.
The complainant, Mr C will receive compensation from Quilter after he was advised to transfer out of a DB pension scheme despite the risk that he would be worse off.
Mr C, who at the time was the director of an electronics company with a salary of £87,000, accrued 15 and a half years pensionable service in his former employer’s DB pension scheme between 1981 and 1996 when he left the scheme.
In that time, at the age of 40, Mr C had accrued an annual pension of £15,598.
His projected annual pension payable at age 60 in 2016 was £40,989, which meant his annual pension income would fall somewhere between £15,598 and £40,989.
The advice firm advised Mr C to transfer the value of his preserved benefits to a new personal pension plan, which was completed in 1998.
In 2010, Mr C was advised by a business (unconnected to Quilter) to transfer his personal pension plan to a SIPP. This was completed in 2011 with around £222,500 transferred.
Following this, Mr C complained to Quilter about the suitability of the initial advice he received to transfer the value of his preserved benefits in his DB scheme to the personal pension plan.
He said he had come to realise the pension transfer had exposed a significant proportion of his pension to more risk than he had realised and the level of investment returns and pension income promised had not materialised.
Quilter's view
The Fos upheld the complaint despite Quilter’s argument that Mr C was “financially astute and had the intelligence and capacity to understand the risks” associated with the transfer.
Quilter pointed to the fact Mr C had previously invested in Enterprise Zone Schemes to illustrate that he “wasn’t a low risk investor” and argued that Mr C would not have been solely reliant on the DB scheme to meet his pension income needs.
In addition to this, Quilter said it thought Mr C’s complaint was “really about his dissatisfaction with the investment performance of his PPP rather than the suitability of relinquishing his preserved benefits".
It stated that the value of Mr C’s pension fund in 2021, when he was 65, was about £380,000 which was greater than the projected fund value of £338,000 as was stated on the illustration provided to him at the time.
The ombudsman heavily contested this last argument and noted that it was unclear why Quilter calculated the value of Mr C’s pension fund at the age of 65 when normal retirement age was 60 at the time.
The ombudsman also noted that Quilter appeared to only quote part of an illustration provided to Mr C to calculate his projected fund value and that it had omitted a contracted out rights element of the illustration which would have increased the projection by £58,600.
In conclusion, the ombudsman said it was his view that Mr C accepted the recommendation to transfer his pension “because he was led to believe by Quilter that he’d receive a higher level of income from the PPP compared to the DB scheme.”
Outcome
In his decision, the ombudsman said a “fair and reasonable outcome” would be for Quilter to put Mr C, as far as possible, into the position he would now be in if he had not received the unsuitable advice.
As such, Quilter was ordered to pay Mr C compensation in line with the Financial Conduct Authority’s guidance on redress for unsuitable DB pension transfers.
Mr C was given until December 16 to reject or accept the offer.
FTAdviser understands that Mr C accepted the offer and that Quilter is in the process of gathering the relevant data to carry out the redress calculation.
jane.matthews@ft.com
