Legal and General could pay up to £150,000 in compensation to a client for the advice it gave them to transfer their accrued final salary benefits into a personal pension.
In a Financial Ombudsman Service ruling, Mr B complains a Legal and General adviser he met in 1998 gave him unsuitable advice to transfer.
He was a member of his occupational pension scheme with about a decade worth of accrued benefits and his attitude to risk was recorded as ‘positive’.
Mr B was in his early forties and married with children when he was advised to transfer his benefits to a personal pension plan.
He was told the growth required to match his final salary benefits was less than 8.3 per cent per year and it was recorded he was prepared to take reasonable risk for the possibility of greater reward.
Mr B complained to Legal and General in 2017 but it did not uphold the complaint so the issue was referred to FOS where it was considered by an investigator.
The investigator thought the complaint should be upheld as the level of growth needed to match Mr B’s existing benefits was at least 8.3 per cent but nearer 9.3 per cent when taking charges into consideration.
The investigator also said it was not made clear to Mr B this level of growth would be necessary just to match his existing benefits and added he could have stayed in the occupational scheme and had the same flexibility at retirement.
Legal and General did not agree and replied it was made clear the value of the personal pension fund and the pension could fluctuate.
It added Mr B was a professional with knowledge of money matters and the growth required was recorded as not more than 8.3 per cent and not 8.3 per cent.
Furthermore, enhanced transfer values were being offered and the employer was not in a strong financial position.
No agreement was reached and the case was referred to ombudsman Keith Taylor who sided with the investigator to uphold the complaint.
He says Mr B was married with children, the occupational scheme was his main pension provision at the time and the advice given to favour a personal pension carried no guarantees.
Therefore this transaction presented a higher degree of risk than he ought to have been advised to take.
To put things right Taylor orders Legal and General to calculate redress in line with the regulator’s pension review guidance as updated by the FCA in October 2017.
Compensation in respect of any past loss should be paid to Mr B as a lump sum while any future loss should if possible be paid into his pension plan.
Taylor adds he requires Legal and General to pay Mr B compensation as calculated above to a maximum of £150,000 within 90 days of it receiving Mr B’s acceptance of FOS’s final decision.
If the amount produced by the calculation of fair compensation exceeds £150,000, Taylor also recommends Legal and General pays Mr B the balance.
Legal and General was not able to comment at the time of publication.