The Financial Ombudsman Service has told an adviser to compensate a client who transferred their pension to access a discretionary fund manager when they did not need to.
In the case, Mr J complains Curo Advisers told him to transfer to a new pension plan to access services from a DFM but then found out a similar service was available with his previous plan.
He argues there was no need to transfer and reduce his pension by the £4,995 fee charged.
Curo rejected the complaint by Mr J and says the full discretionary fund management service was not available under his existing plan, only via a managed portfolio service.
When Mr J referred his compliant to FOS he indicated the portfolio options were very similar to those offered by his existing plan via the same discretionary fund manager, which he could have accessed and not paid a fee.
The adjudicator established from the previous pension provider that it did offer access to fund managers via model portfolios although not a full bespoke discretionary fund management service.
However these model portfolios were not explained adequately to Mr J who could have accessed them at an extra cost of 0.3 per cent per annum without the need to transfer.
The adjudicator says Mr J would have chosen the lower cost option had it been explained and compensation should be based on a return of additional costs.
However the adjudicator also notes Curo was not responsible for the investment decisions made by the discretionary fund managers.
In her response ombudsman Lesley Stead explains the reasons for siding with the adjudicator.
She says: “Essentially I don’t think the transfer was necessary. Mr J’s objectives could have been met under his existing pension plan. And, broadly, I agree with the redress suggested by the adjudicator. Curo wasn’t responsible for investment decisions after Mr J had transferred.
“So I think basing redress on the extra fees and charges Mr J incurred is a fair and reasonable way of compensating him. It puts him back in the position he’d have been in if he’d kept his existing pension plan. Curo should refund in part at least the fee it charged Mr J.”
To compensate, Curo should return any setting up costs of the new plan and the difference in the charges between the new plan and the previous plan up to the date Mr J changed advisers.
Furthermore interest at 8 per cent per annum should be added from the date of each deduction from the new plan to the date of payment.
Finally Curo should return £2,785 of the fee plus interest at 8 per cent per annum from the date the fee was deducted from the pension plan to date of payment.
A similar case handled by FOS also concerns a complaint from Mr G who complained about advice given by Curo to transfer to a new pension plan to access discretionary fund managers.
Mr G found out that a similar service was available with his previous plan and argues he doesn’t think he needed to transfer and reduce his pension fund by the £3,785 fee charged.
Here FOS ruled Curo should compensate Mr G along the same lines as they compensate Mr J.