FOS orders Standard Life to pay redress over missed Sipp reviews

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The Financial Ombudsman Service has ruled Standard Life must compensate a customer after the provider failed to review and manage his Sipp.

Standard Life advised the customer, referred to as ‘Mr S’ in the ruling, to transfer his three pensions to a Sipp in 2008.

The customer immediately took 25 per cent of tax-free cash worth around £41,000 and placed the rest of his funds – around £121,000 – in the Sipp in cash.

The suitability report said Standard Life would review the customer each year as well as rebalance his portfolio twice a year.

In the final ruling, Ombudsman Benjamin Taylor says he was concerned about the suitability of Standard Life’s advice. In particular, the FOS raised concerns about the withdrawal of tax-free cash and whether it had properly explained the benefits of guaranteed annuity rates.

Taylor said the fact the report included “an entirely different person’s name” also raised alarms.

However, he says the customer probably would have transferred his funds to the Sipp anyway.

He says: “The attractiveness of an annuity was reduced by the fact he didn’t require an income at this time, and wouldn’t for a number of years.

“When combined with Mr S’s objective of providing for his wife, on the balance of probabilities, he still would have taken this course of action.”

However, Taylor says Standard Life wronged the customer by failing to carry out reviews between 2008 and 2012.

He says: “Leaving the funds in cash for six years has been detrimental to the value of Mr S’s Sipp.

“He has paid charges for the [portfolio management service] and Sipp which meant he has made no return on the money at all. It has stagnated and with the withdrawals has meant the capital has simply shrunk.

“To move to a Sipp for the purpose of being able to retain the flexibility of drawdown means the funds must be invested to some extent.”

Taylor adds: “Standard Life did do something wrong and it’s fair and reasonable for Mr S to be compensated for that. But from 2013 Standard Life were taking measures to correct those errors and some responsibility then rested with Mr S.

“As a result any compensation should be limited up to the time of the review in September 2013.”

The FOS has ordered Standard Life to compare the value of the Sipp with a benchmark it calculated to determine the compensation it must pay. The provider must also pay the customer £250 for any trouble and upset it caused him.