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FOS Orders Compensation Following Unsuitable Defined Benefit Pension Transfer

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The Financial Ombudsman Service (FOS) has ordered financial planning firm, Copia Wealth Management to pay compensation to one of its clients following unsuitable advice to transfer out of a defined benefit final salary pension scheme.

The FOS, a Government-backed body set up to resolve complaints between financial businesses and their customers, found that Copia’s client had been incorrectly assessed as being prepared to take a high level of risk leading to the transfer from his final salary pension into speculative investment funds via a Self-Invested Personal Pension (SIPP). The client, Mr L, complained to the FOS as he felt that he had lost out following the transfer.

The Ombudsman found that a combination of having no investment experience, earning below the national average and with minimal savings, meant that Mr L should never have considered transferring to such high-risk investments.

In his findings, the Ombudsman, Keith Taylor determined:

“There was little, if any, capacity for loss. I agree with the investigator that Mr L’s circumstances don’t present a picture of a typical high-risk investor.”

The FOS investigation further revealed that the SIPP fees were higher than those of the defined benefit scheme he had transferred from.

The Ombudsman concluded:

“With suitable advice, I don’t think Mr L would have transferred these benefits and so he wouldn’t have made the investments that he did.”

Copia was ordered to put Mr L back in the position he would have been but for their inappropriate advice.

Defined benefit (final salary) pension schemes are a very solid and dependable source of income for retirement and there must be an extremely good reason to transfer this into a riskier type of investment. Getting the right sort of advice on this is therefore crucial.

TLW has a number of clients with very similar experiences to the complainant in this case. Even if you have been led to believe that you are a high-risk investor, this does not necessarily mean that you have been correctly assessed.

The rules that regulated advisers must follow are strict. Government-backed City watchdog, the Financial Conduct Authority (FCA) sets out these rules which are designed to protect customers. Amongst other regulatory obligations, advisers must ensure that any advice they give is suitable.

To enable this to happen the adviser must obtain all the necessary information regarding their client’s:

  • knowledge and experience in the investment field relevant to the specific type of designated investment or service;
  • financial situation; and
  • investment objectives.

Commenting on the FOS’ findings, Peter McKenna, Partner and Head of the Financial Mis-Selling team at TLW Solicitors said:

“Given the security and benefits offered by Defined Benefit schemes, the huge number of people being advised to transfer out of their DB schemes is very surprising. Unfortunately as FOS found in Mr L’s case, we are seeing more and more examples of people being given advice to transfer out of DB schemes when, looking at their circumstances, the advice is just not suitable for them.

Many of our clients do not actually realise how much they have lost out on until we have carried out a proper investigation of their claim. Sometimes our clients have lost out on hundreds of thousands of pounds by following this unsuitable advice.”

Working on a ‘no-win – no-fee’ basis, TLW’s experienced team can help you through the FOS compensation processes. Our clients are reassured by our knowledge and experience of FOS procedures and, indeed, we have had claims successfully upheld for clients whose claims had previously been refused on purely technical grounds.

To find out more about defined benefit pension transfer claims watch our ITV television advert or our useful information videos.

If you are concerned about your, a friend or loved one’s transfer out of a defined benefit, final salary or company pension scheme, please get in touch with TLW Solicitors by calling 0800 169 5925, email or complete our callback form.

Time limits can apply and so anyone wishing to bring a claim should do so without delay.

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