Friends Life must refund a customer more than £3,000 because it did not clearly set out how she could avoid incurring a penalty for withdrawing money from her fund.
A ruling by the Financial Ombudsman Service sets out how the customer, known as Mrs C, was charged a penalty fee of £3,339.63 when she withdrew money from a Friends Life investment.
She says the form Friends Life sent her did not include the option to avoid a penalty or tell her what else she could do to avoid it, even after her adviser had asked the company how she could get around this.
The FOS says it was obvious from emails between the customer’s adviser and Friends Life that she wanted to be able to withdraw without paying a penalty and that the charge was incurred because the form was poorly written.
Ombudsman Ivor Graham says the guidance Friends Life gave the customer on how to avoid a penalty was “poor”.
Friends Life disputed it should pay back the charge because there were other parts of her investments that were not subject to a penalty. However, it admitted those other investments would have been subject to higher tax charges so the customer had opted for the most tax efficient way of taking out her money.
The provider also said the customer is now in a better financial position overall so it would not be fair to surrender the withdrawal penalty, and argued it had carried out the customer’s instructions.
Graham agrees the customer could have accessed investments worth £120,000 without paying a penalty or tax liability.
But in the final decision notice, he says: “It is reasonable to assume that she would have used these other funds rather than suffer the penalty of £3,339.63. This addresses the arguments put forward by Friends save for the claim that it was merely carrying out Mrs C’s instructions. However, I have already covered that point in my provisional decision and I see no merit commenting further.”
Graham upheld the complaint and ordered Friends Life to refund the penalty of £3,339.63 and pay her £200 in compensation.