FOS upholds transfer complaint against Tilney

The Financial Ombudsman Service (FOS) has upheld a complaint against Tilney Financial Planning Limited concerning advice it gave regarding a transfer from a workplace scheme to a self-invested personal pension (Sipp).

The complaint, from 'Mrs H', stems from advice to transfer from Tilney, which was proffered based of the firm’s understanding that the value of her defined benefit (DB) benefits from the occupational scheme were £92,852 and her defined contribution (DC) benefits amounted to £31,991.63.

A cash equivalent transfer value (CETV) had been issued by the occupational scheme administrators on 31 May 2017, guaranteed until 30 August 2017, which stated that the total value was £92,851.83, with £73,141.87 relating to the DB benefits and £19,709.96 to the DC benefits.

The former were “guaranteed” and the latter described as “variable in line with market conditions”.

Tilney received a DC benefit statement from the scheme’s administrators in June 2017, with the value of those benefits at £31,991.63 as at 31 December 2016.

When Tilney had recommended a transfer and Mrs H had accepted the advice, a transfer value of £94,624.59 was paid into her Sipp in early September 2017.

Tilney checked with the occupational scheme administrators who initially said the transfer value for the DC benefits would follow shortly, but later said that there were no further sums to be transferred.

When Mrs H complained to Tilney, they upheld the complaint on the basis that they should have done more to verify the information provided and offered her £300 compensation, but stated that the advice to transfer had still been suitable.

Mrs H referred her complaint to the Financial Ombudsman, where an adjudicator upheld her complaint after deciding that her transfer was based on incorrect information and stating that a rate of growth exceeding 8 per cent would need to be met year-on-year for over ten years, just to match the benefits that Mrs H was guaranteed to receive from the occupational scheme.

However, Tilney had quoted a critical yield (CY) of just 6.65 per cent based on their incorrect knowledge of Mrs H’s benefits in the workplace scheme, which would have been more possible to achieve.

Tilney disagreed with the decision, with their arguments including the fact that Mrs H had been employed as a financial adviser for fourteen years and had been authorised to advise on workplace scheme transfers, while also pointing out that the transfer had still achieved Mrs H’s main objective of gaining greater flexibility in respect of death benefits and reducing the impact of inheritance tax.

Mrs H countered the first argument by stating that she had been out of work for more than three years when she contacted Tilney and so her knowledge was out of date, leading her and her husband to pay a monthly fee to Tilney to ensure their financial plans remained on track.

However, as Mrs H was expecting to receive around £30,000 more than she got, the adjudicator was not persuaded that she would still have transferred if she had been given the correct information and accepted the complainant’s knowledge would have been out of date, especially as freedoms had been introduced in the intervening period.

The ombudsman stated: “The point is, and as Tilney accepts, the advice was flawed. The CY, which is invariably an important factor in considering whether to transfer, was wrong and understated. The issue isn’t whether Mrs H understood Tilney’s advice but whether she’d have made the same decision had she been given the right information.

“She’s said she’d have thought again. I don’t think that’s implausible. She’s said she was expecting around £30,000 more to be transferred. The CY quoted seemed high, but she was told that CETVs were at a historic all time high and in future the CY would be much higher. If the correct CY had been quoted that would likely have changed her decision to transfer.”

The ombudsman ruled that Tilney should undertake a redress calculation in line with the pension review methodology, as amended by the Financial Conduct Authority (FCA) in October 2017, with the calculation being carried out using the most recent financial assumptions published by the FCA at the date of the actual calculation.

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