IFA  

Adviser’s pension review sees client handed £187k

Adviser’s pension review sees client handed £187k

An adviser has helped his client claw back more than £180,000 after a pension review revealed he had been wrongly advised in the past.

The issue was first raised when Lee Clarkson, director and financial wealth adviser at Paladin, took a look at his client’s pension pots as part of a review.

Mr Clarkson told FTAdviser he noticed an anomaly in the client’s pension history which meant he may have missed out on tens of thousands of pounds.

According to Mr Clarkson, he noticed that his client’s defined benefit pension and gaps in his employment were not matching up.

For seven years his client was not enrolled in his employer’s final salary scheme, despite the fact he had only taken a year’s break from employment.

The adviser then noticed the client also held a personal pension.

Mr Clarkson said: “It turned out that he had started the personal pension when he had left employment for a year, but when he started back he had top-ups going into the personal pension rather than rejoining the DB scheme.”

According to Mr Clarkson, this all occurred before 2001 and the rules at this time meant that individuals could only have one pension in relation to employment.

When the client was asked why he did not rejoin the scheme he did not have a reason, saying that his adviser at the time had not instructed him to.

Phoenix steps up

The client complained to Phoenix that he had been financially disadvantaged by following advice at the time to take out a personal pension rather than joining the occupational pension scheme.

After it had considered the complaint, Phoenix agreed the client had been “badly advised” in the past and said the benefits he received from his personal pension were lower than those he would have acquired via a DB scheme.

Therefore, Phoenix agreed to pay him a one-off cash compensation sum of £187,136.

Phoenix worked out that the amount the client had been disadvantaged by was £220,160.

However, after this value was adjusted to take income tax into consideration, and assuming that 25 per cent of the pension fund could have been paid as a tax-free lump sum, it was determined that the final loss amount was £187,136.

Mr Carkson said: “The client is really happy as this is a life-changing amount of money for him. He had worries about work and the job market and now this has been sorted.

“He is over the moon and never thought that there was anything wrong. When he had spoken to people before, this hadn’t been raised as an issue.

“It is only because pre-2001 you couldn’t have dual membership, so I became curious as to why this pension was running alongside his workplace pension.”

He added that the final payout amount is more than a third of the total worth of his client’s collective pension pots.