FOS rules against insistent client pension transfer


The FOS has ruled against advice firm Portal Financial after it transferred the pension of an illiterate insistent client.

The client, Mrs W, complained that she wanted to take tax free cash from her pension to pay for new solar panels. She claimed she did not realise Portal had transferred the pension until later.

In 2012 Portal had a telephone conversation with Mrs W in which it noted she needed to leave her occupational scheme to release the cash and that she could not read or write.

However, it subsequently wrote to her recommending she did not transfer from an occupational scheme and provided an insistent customer form that she signed.

The FCA published guidance on dealing with clients who go against the recommendation of an adviser in June 2015.

Portal calculated the transferred pension would need to grow by 12 per cent a year to match what the employer’s scheme would have provided. Mrs W also signed a form declaring she understood what critical yield was and the low likelihood her new scheme would return 12 per cent.

Portal said it expected Mrs W to rejoin her employer’s scheme after the transfer, but she retired with ill health in March 2014 before this could happen.

In June 2015 a FOS adjudicator investigated the complaint and was not satisfied the transfer should have been arranged, even on an insistent client basis. But Portal disagreed, saying it would have been discriminatory if it had refused to transfer because of Mrs W’s learning difficulties.

Ombudsman Adrian Hudson says: “I cannot ignore the fact that Portal knew that Mrs W could not read or write. It was required to act in the best interests of Mrs W. Portal knew that Mrs W could be worse off if she transferred from her former employer’s pension scheme.

“I take the view that Mrs W’s circumstances were such that Portal should have acted with considerable caution. If it wished to act for Mrs W, it should have given all the information she needed in order to make an informed decision – and in a format that she would have been able to understand.”

It adds: “I am not satisfied that Portal gave Mrs W sufficient detail about the benefits that she was giving up by transferring or what she could receive. In my opinion, had it done so, Mrs W  would have seen the extent of the harm that would be caused by transferring and taking her lump sum.

“I believe that she would have decided against taking benefits. If Portal having advised Mrs. W not to transfer out had not persuaded her of folly of her actions it should have in my opinion have declined to transact the business.”

The Ombudsman has ordered Portal to carry out a loss calculation based on Mrs W remaining a member of the occupational scheme. The advice firm will be liable for any loss minus 15 per cent. This takes into account the 25 per cent tax free lump sum and a basic tax rate on the remaining 75 per cent.

In addition, Mrs W will receive £250 for the trouble and upset suffered.

Read the full decision here.