FOS orders JLT to pay client £150,000 over unsuitable transfer advice

The Financial Ombudsman Service (FOS) has ordered JLT Actuaries and Consultants to pay ‘Mr W’ around £150,000 after advising him to opt out of a final salary workplace pension scheme in 1997.

JLT advised Mr W to transfer the value of his pension benefits to join a new group personal pension (GPP) set up by his employer.

However, Mr W argued that he would have remained in the final salary scheme had it not been for JLT’s advice, and he wished to be compensated for any losses he incurred.

The FOS upheld Mr W’s complaint and has ordered JLT to pay the “total fair compensation” for any losses, to be calculated as set out by the FOS, which estimated the total amount to be around £150,000.

In his report, ombudsman Adrian Hudon stated: “My final decision is that I uphold the complaint, and that a fair and reasonable outcome would be for JLT to put Mr W, as far as possible, into the position he would now be in but for the unsuitable advice.”

Mr W had joined his employer in February 1992 and became a member of the employer’s final salary pension scheme with effect from 1 April 1992.

In June 1997, Mr W met a JLT representative to discuss his pension provision, with a report produced in August of the same year that said if he transferred his savings from the pension scheme to the employer’s new GPP, he would have greater benefits in retirement.

JLT carried out a review into the advice Mr W received, and found that, although he had been subject to financial losses, JLT was not liable for his decision to transfer his savings.

Mr W then brought his case to the FOS in September 2016, which found that the assumptions JLT has used to calculate his returns were “misleading” and that the contribution rates to the GPP were higher than his final salary scheme contributions, and they were therefore incomparable.

Furthermore, it found that Mr W’s salary had increased significantly since he has opted out and this would have had “a more significant effect on the final salary benefits in the comparison that was carried out by JLT”.

JLT challenged the ombudsman’s findings in December 2018, as it believed its assumptions were fair.

However, in its most recent ruling, the ombudsman said: “JLT has argued that the advice was given over a period of months and that Mr W was fully engaged in the process and the discussions.

“However, in my opinion, the fact that the advice was given over a period of months and Mr W was fully engaged with the discussions does not make it appropriate or guarantee that it is correct.

"I do agree with JLT that the assumptions that it used in the comparisons were clearly stated but I do not consider that the assumptions used were balanced.

“There is no evidence that JLT explained to Mr W what happened if the assumptions varied. Mr W was not a pension expert and would have not been aware of the impact on the results that changing the assumptions could have.”

Hudson concluded: “If the amount produced by the calculation of fair compensation exceeds £150,000, I also recommend that JLT pays Mr W the balance.

“I further recommend interest to be added to this balance at the rate of 8 per cent per year simple for any time, in excess of 90 days, that it takes JLT to pay Mr W from the date it receives notification of his acceptance of the decision, as set out above.

“If Mr W accepts my determination, the money award is binding on JLT.”

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