AJ Bell must compensate a customer who complained about losing value in his Sipp after a transfer to Hargreaves Lansdown was delayed.
Before the transfer was requested, the Sipp-holder had been investigated by the Lothian and Borders Police for a suspected fraud. At that time, the police wanted AJ Bell to get their consent before approving a transfer or withdrawals.
Between July and October 2012 the complainant, Mr N, transferred £265,000 into the AJ Bell Sipp in four stages. He put the full value of the Sipp temporarily into cash-only funds while he considered his investment options.
In November 2012, AJ Bell was contacted by the police in relation to the Sipp.
A few months later, in February 2013, trustee Henderson Loggie told AJ Bell that Mr N had entered bankruptcy. AJ Bell said the Sipp funds fell outside Mr N’s estate for those purposes.
In May, Henderson Loggie, the trustee of the bankruptcy, agreed the Sipp fell outside Mr N’s estate for sequestration purposes however it said it was investigating if any “excessive contributions” had been made towards the Sipp.
In June of that year Mr N requested his funds be transferred from the Sipp to Hargreaves Lansdown, to move out of his cash only position.
The police said its investigation had come to an end but when AJ Bell informed the trustee of the request, it refused to authorise the transfer.
For the next 12 months, correspondence continued between Mr N, AJ Bell and the trustee. Mr N’s transfer requests kept getting declined by the trustee, including a request to transfer to a different Sipp within AJ Bell.
In June 2014, the trustee said it had completed its investigation into the Sipp and Mr N’s transfer to Hargreaves Lansdown was completed in July 2014.
Mr N complained to The Pensions Ombudsman that he was refused a transfer between June 2013 and July 2014.
He told the ombudsman he would have invested in six equity funds through Hargreaves Lansdown and his Sipp would have grown by approximately £150,000 if it had been invested in them for the extra year.
The complaint was referred to an adjudicator at TPO and then to an ombudsman who upheld the complaint.
Pensions ombudsman Anthony Arter says AJ Bell had reason to be cautious, “even suspicious” of any transfer requests from Mr N.
AJ Bell had previously told the adjudicator Mr N had also previously submitted fraudulent transfer requests to AJ Bell itself.
Arter says: “However, this does not mean it should be necessarily deny every transfer request. The transfer request in question appeared to be legitimate and the receiving provider was a well-known, reputable pension provider.”
He adds: “Furthermore, I understand AJ Bell’s hesitancy to ignore the instructions of the trustee and allow the transfer. However, AJ Bell was not legally obliged to adhere to the trustee’s requests, and Mr N did have a statutory right of transfer. AJ Bell therefore ought only to have adhered to the trustee’s request where it was obliged to do so.”
The ombudsman says the evidence suggests the trustee was unlikely to make a claim on Mr N’s funds and, even if they did, they would have been able to do this after the transfer had gone ahead in 2013.
The ombudsman agrees with the adjudicator that Mr N did not provide enough evidence to show he would have invested in the six high-performing equity funds through Hargreaves Lansdown.
The ombudsman says AJ Bell should compensate Mr N for the difference between what his Sipp was worth when it crystallised and what it would have been worth, had his transfer not been delayed.
AJ Bell chief executive Andy Bell says: “We wouldn’t normally comment on Ombudsman rulings but in our opinion it has made a very poor decision in this case. The client was a convicted fraudster, was being investigated again for a suspected fraud at the time and had entered bankruptcy.”
He adds: “We had been asked by the police and the trustee of the bankruptcy to get their consent before any transfers or withdrawals were made. The only reason for the delay in the transfer was because we were complying with the trustees of that bankruptcy as you would expect any pension provider to do. To most eyes this would be seen as a highly suspicious transfer request, which makes the ombudsman ruling all the more bizarre.”