AJ Bell has avoided a compensation order from the Pensions Ombudsman after it found the provider’s software was to blame for an error which occurred when calculating certain elements of a client's pension funds.
The client had raised a series of concerns about the way AJ Bell had administered his self-invested personal pension, including misreported investment valuations, wrong maximum income calculations, wrong tax calculations, and problems with the method of calculating the Sipp’s crystallised and uncrystallised fund splits.
AJ Bell acknowledged its errors in relation to three of Mr E’s complaints but the provider did not accept the complaint about the fund split calculations stating its software was proprietary, administered by an external provider, and hence business sensitive, which was why it could not explain the details behind the results.
The provider offered the client £500 in compensation for the inconvenience caused but the client took his case to the Pensions Ombudsman.
The client, who the ombudsman called Mr E, argued that AJ Bell’s fund split never matched his own calculations.
Mr E’s Sipp funds are held in capped drawdown from which Mr E takes intermittent income and pension commencement lump sum payments, therefore it is partly crystallised and uncrystallised.
A personal pension becomes 'crystallised' as soon as the individual starts cashing it in and taking their retirement benefits.
Mr E first accessed his pension in November 2014 when he took a pension commencement lump sum. He then accessed it again in March 2016 where he took another lump sum and income payment.
On both of these occasions a fund split calculation was undertaken by AJ Bell.
In January 2017, Mr E decided to take further funds, at which time AJ Bell confirmed that the fund split was 74.46 per cent uncrystallised and 25.36 per cent crystallised.
At the same time Mr E raised concerns about AJ Bell’s March 2016 fund split statement and after investigation the provider admitted that an error had occurred and the crystallisation part of the fund had been overstated by £7,000.
Mr E went on to query further fund split calculations made by AJ Bell.
In October 2017, AJ Bell stated: “When it comes to calculating and making payment our system will produce slightly different figures, in the case of the most recent benefit crystallisation event (BCE), the figures altered the uncrystallised and crystallised funds by £23.50 respectively – this is a variable of 0.0038 per cent of the total fund value in comparison with the manual figures."
It added: “We’re not able to show the workings of our system. The closest we can get is to produce the figures manually using our own in house spreadsheet tool.”
Mr E then took further payments from his Sipp which resulted in a calculated fund split of 74.62 per cent uncrystallised and 25.38 per cent crystallised.
But Mr E was concerned about the fund splits detailed by AJ Bell in January 2017, and again in January 2018, arguing they were different to his own calculations.