FOS upholds decision against Openwork over £10k pension transfer commission

The Financial Ombudsman Service has upheld a decision against Openwork for transferring a client into a higher-charging pension fund.

A former client complained to the FOS he would not have followed advice, given pre-RDR, to transfer his £140,000 pension to a different provider if Openwork had told him its initial commission would be £10,000.

The ombudsman upheld the complaint in part, saying it is difficult to determine what the adviser said about the level of commission.

It says the recommendation was not unreasonable as it allowed the client to invest in more than one fund.

But it says there was no justification for recommending a fund with a charge 0.3 per cent higher than the standard charged funds, which would have provided the required diversification.

In the final decision, published last week, ombudsman David Ashley said: “Although information about charges may have been provided, it does not appear it was provided in a format similar to that sent to us by the firm in response to the complaint.

“I do not consider it likely Mr G would have appreciated the impact that a small difference in charges could make on the potential returns at retirement date.”

The FOS has ordered Openwork to pay £200 for distress and inconvenience, and the difference in the projected fund value between the recommended and standard charged funds, which Openwork calculates to be £1,550.

An Openwork spokesman says: “The level of redress reflects the relatively small expected impact of additional costs, which were disclosed to the client.”

Plan Money director Peter Chadborn says: “Client confusion over costs like this makes it hard to be critical of what the RDR is trying to achieve in terms of charging transparency.”

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There are 2 comments at the moment, we would love to hear your opinion too.

  1. FOS say: There was no justification for recommending a fund with a charge 0.3 per cent higher than the standard charged funds, which would have provided the required diversification. Commission no more relevant than a barrister’s fee in a murder trial! What is important is the client outcome. I can only hope there is more to this case and the FOS decision than is being reported. It may be that there was no demonstrable advantage to the client in which case FOS would be correct. However, we must be cautious because clearly at face value this decision contradicts regulatory guidelines:

    But what about The Sandler & Myners Review?

    Summary: The 2002 Sandler review was commissioned by HM Treasury concluded: “If a fund is a truly superior performer, it will still be well worth investing in it even if its charges are above average.”

    The Myners Report of March 2001 said: “Strategic asset allocation decisions should receive a level of attention (and, where relevant, advisory or management fees) that fully reflect the contribution they can make towards achieving the fund’s investment objective.”

    Commission is no more relevant than a barrister’s fee in a murder trial! What is important is the client outcome. I can only hope there is more to this case and the FOS decision than is being reported.

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