Sipp provider Hornbuckle has been ordered to pay at least £25,000 to a customer after errors led to a £537,357 unauthorised payment.
The Pensions Ombudsman said Hornbuckle should reimburse Michael Williams fees for its “woefully inadequate” services as well as tax consultancy, financial advice fees, and potential unauthorised tax charges.
Williams had three flexible income drawdown products with the provider. In 2009 Hornbuckle told Williams’ adviser the maximum yearly pension available was £537,835.
The adviser asked for this payment to be made immediately, with another payment of the same amount made as near in the next tax year as possible.
But both payments were made within the same pension year and exceeded the recalculated income for that year, resulting in an overpayment of £535,513.89.
Hornbuckle realised the mistake in 2013, four years later. It asked for the full amount to be repaid, warning of the risk the overpayment would be treated as an unauthorised payment and subject to tax charges.
The firm apologised for the error but say they were not wholly responsible and that compensation should not be paid.
It is not yet known what the tax charge on the overpayment will be, but Williams says he paid £10,434 for tax consultancy, £12,375 in financial adviser fees and £257 in accountancy fees as a result.
Pensions ombudsman Anthony Arter says Hornbuckle should have warned the adviser of the potential for an overpayment and could have used its powers to impose restrictions on the timing of payments.
A Hornbuckle spokesman says: “This is a legacy error uncovered and reported by us in 2013. We have worked with the parties to ensure no financial detriment to Mr Williams and the POS has agreed our position.”