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.
Mr Clarkson added: “He is now able to help his children get on the housing ladder and his wife is thinking of retiring so this has meant a lot to them as a family.”
A spokesperson from Phoenix Life said: “[The client] did not have his pension reviewed in the 1990s, when many pension savers were written to and invited to have their pension provision assessed.
“When his IFA contacted us, we made arrangements for his pension to be reviewed. It transpired he should have been redressed as he was financially disadvantaged by the advice he received, which was to take out personal pensions rather than joining his occupational scheme.
“It’s important people discuss their pension policies with their financial adviser who can help assess their needs and check whether their plans should be reviewed.
“We are pleased to hear [the client] has been properly redressed.”
The client also secured an extra £200 for the inconvenience caused due to delays when dealing with the case.
Advisers often pride themselves on making sizeable savings for their clients, and there have been several other high-profile examples this year.
Earlier this year (April 3), FTAdviser reported how Felix Milton, adviser at Philip J Milton & Company, saved his client £18,000 after a provider blunder resulted in an Isa transfer occurring a month late — after markets had fallen 24 per cent.
At the time, Mr Milton said: “Advisers should always complain if they think there has been a provider mistake which could have cost their client.”
Another example is when Neil Liversidge, managing director of West Riding Personal Financial Solutions, won £74,000 in compensation for his client after the adviser discovered he had been inaccurately advised to transfer out of his defined benefit pension in a case dating back to the 1990s.
Advisers often pride themselves on making sizeable savings for their clients, and there have been several other high-profile examples this year.
amy.austin@ft.com
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