Unsuitable DB Pension Transfer Advice Sees FCA Hand Warning Notice to Unnamed Adviser

In the warning notice, the FCA states that the individual acted as a CF30 (the customer-dealing function of an advisory service), as well as performing both director (CF1) and compliance (CF10) functions at the firm.

In their roles as a CF30 and Pension Transfer Specialist (PTS), the individual was reportedly “reckless and thereby acted without integrity” because they made personal recommendations without:

• Obtaining adequate information from customers about their financial situation (such as additional resource and expenditure details)
• Adequately assessing customers’ attitudes to transfer risk and investment

These details are necessary for advisers to assess the suitability of customers transferring out of their DBPS, and to ensure that the individual was aware of these requirements when making personal recommendations.

The individual also approved ‘Suitability Reports’, which are required if an adviser or firm makes a personal recommendation to a customer who then – among other things – enters into a pension opt-out. According to the FCA, these reports did not provide the customers with enough information to make an informed decision about their Pension Transfer.

In their roles as a CF1 and CF10, the individual was reportedly “reckless and thereby acted without integrity” because they did not take sufficient steps to ensure that:

• The firm assessed the suitability of customer Pension Transfers
• The firm used adequate, appropriate fact-finding processes for customers to provide them with sufficient information
• The appropriate compliance monitoring system was in place to ensure compliance with the FCA’s Pension Transfer requirements and standards.
• Adequate customer files and records were kept.

The FCA report stated:

“This was despite knowing that their oversight failures increased the risk that the firm might provide unsuitable pension transfer advice to its customers, in breach of several COBS rules applicable to the firm, and despite the significant increase in the number of customers seeking such advice during the relevant period.”

COBS is the Conduct of Business Sourcebook, the FCA’s guidance handbook for how firms and their staff should deal with customers.

The individual also failed to inform the FCA that they had agreed on a settlement relating to “dishonesty in relation to their financial affairs” during the relevant period outlined in the report.

The individual’s – and the firm’s – conduct and unsuitable advice did not comply with FCA requirements and standards; the report concludes, “creating a significant risk that the advice that a customer should transfer out of their DBPS would not be suitable for them.”

Defined benefit or final salary pension schemes, sometimes called a ‘company pension’, are generally very dependable pension schemes that promise to pay a specific amount from their retirement until the end of life, based on criteria under the scheme.

Many public sector workers and those in large established companies, such as local authorities, NHS, armed forces, emergency services, P&O Ferries, and British Steel, have ‘defined benefits’, ‘final salary ‘or ‘company’ pensions. The benefits offered are rarely beaten by other pension investments, so, depending on individual circumstances, it is generally not advisable to transfer out of a Defined Benefit Pension Scheme and into a Self-Invested Personal Pension (SIPP).

Sometimes, financial advisers can advocate transferring out of the final salary pension scheme offered by a workplace; however, pension transfers are a big decision and transferring out of a final salary scheme is rarely good advice; unfortunately, many people have been advised to do that due to negligent financial advice.

Customers who have received unsuitable financial advice to transfer out of their defined benefit pension scheme have often been mis-sold the benefits of doing so.

For those looking to recover their pension money, there are strict time limits within which to make a compensation claim. It is therefore important to get specialist help as soon as possible. Don’t leave yourself out of pocket for your retirement.

For those who may have lost out or are concerned about the advice they were given about transferring out of a DB pension scheme, it may be possible to recover compensation for your loss.

Whilst these transfers may have been made many years ago, it is still possible to claim compensation if you are the widow of someone who transferred their pension or if the Independent Financial Adviser has gone out of business, has been taken over or changed its name.

The next steps could include a claim for compensation through the Financial Ombudsman Service (FOS), a government-backed body set up to resolve complaints between FCA-regulated financial businesses and their customers.

Alternatively, where an IFA goes out of business, compensation claims up to the value of £85,000 can still be made through the government-backed Financial Services Compensation Scheme (FSCS), which was set up to help victims of failed financial firms. This is not currently the case with the individual issued the FCA warning notice.

TLW Solicitors are specialists in mis-sold defined benefit (final salary) pension plan transfers. Speak to us today to find out if you have a claim.

Legal Director and Head of Professional Negligence at TLW Solicitors, Sarah Spruce, commented:

“While we do not know exactly who the adviser or firm referred to in the warning notice is, it is rarely a good idea for anyone to transfer out of their Defined Benefit Pension Scheme and often when people do it is as a result of poor or negligent advice.

In many cases, until our specialist team can get an up-to-date valuation of the pension that our clients would have had, they often do not realise how much they have lost out, which can be a significant amount. If this sounds familiar, get in touch with my team today.”