The Pensions Ombudsman has ruled Phoenix Life should reimburse a client for the financial losses he suffered due to a breach of contract that led to the disinvestment of his funds.
In the case Mr T complained that James Hay made an unauthorised encashment of his savings, formerly held in a Sipp, and that Phoenix Life failed to honour the terms of the original policy.
In August 2000, Mr T signed an application form with Phoenix Life for a flexible income plan to be held in a Sipp with the trustee listed as James Hay Pension Trustees.
The policy term selected on the application form was 15 years and Mr T transferred around £123,000 to the Sipp and invested 100 per cent of this in the Global Care fund.
In June 2015, Phoenix Life wrote to James Hay Pension Trustees to confirm that the policy within the scheme was to mature the next month.
James Hay confirmed the holding had been surrendered.
In July 2015, £216,366 was disinvested and Mr T confirmed he transferred the amount to another Sipp provider, which completed on the following month.
Mr T said he placed orders for new investments on this same date, and he reinvested proportionately into five funds, which were purchased between 19 and 21 August 2018.
He says the maturity was not necessary and it should not have been allowed without his consent as he understands he would have free access to move to other James Hay funds.
He holds both Phoenix Life and James Hay responsible for the automatic disinvestment.
Mr T’s complaint was considered by one of TPO’s adjudicators who said no further action was required by James Hay but concluded Phoenix Life should reimburse Mr T for any loss and pay him £500 for the distress caused.
This was because the original Phoenix Life terms and conditions do not state disinvestment was an automatic requirement upon the maturity date. James Hay bore no responsibility as the trustee as it followed the instructions issued by Phoenix Life and the disinvestment was invoked by Phoenix Life so it bears the liability for any financial loss.
Mr T did not accept the adjudicator’s opinion and the complaint was passed on to ombudsman Anthony Arter who agreed with the reasoning.
Arter says the disinvestment was instigated by Phoenix Life and James Hay as the trustee simply provided the necessary bank account details for transferring the disinvested funds.
Phoenix Life accepted it made an error in instructing James Hay to disinvest the fund and its terms did not in fact require the automatic disinvestment.
It has been told to compensate Mr T for any losses incurred and pay him £500 directly.
Phoenix Life was not able to provide a comment in time for publication.