Prudential must compensate a customer whose transfer value was significantly reduced after a meeting with an in-house adviser.
According to a Financial Ombudsman Service decision, the customer, called Mr L, was told on 2 March 2017 that the transfer value for his pension policy was £141,981.
He met with a Prudential adviser, who recommended he transfer into a different Prudential pension plan that would give him flexible access to his income. However, when he received details of the new plan, he saw that the transfer value to set it up was £128,714.
According to the FOS decision, the adviser’s report recommending the transfer said the value can vary, particularly between January and March because Prudential reviews its rates around that time.
The report also said the transfer value quoted in March could be higher or lower than expected and illustrations noted the quoted pension value could change.
The FOS decision says the customer and the adviser both received a letter on 8 March 2017 that gave a transfer value of around £129,000. Prudential told the FOS that it took into account the expected reduction in rates that would take effect from 1 April that year.
Ombudsman Doug Mansell says that the lower figure was a more accurate reflection of the value of Mr L’s policy.
The decision says: “It’s clear the adviser was aware of the lower figure, as he included it in his report. But he only did so for the purpose of showing Mr L the guaranteed basic annuity he would lose if transferring away from his policy.”
Mansell adds: “On the whole, I think the adviser should have based his advice, and any illustrations used to show Mr L the potential benefits he would receive, on a value of £128,791. Prudential says it’s not its practice to keep updating quotes, but I’m not convinced by this argument. I think it’s important for a customer to be given as accurate information as possible so as to make an informed choice.
“It doesn’t appear that Mr L was in any rush to take his benefits. So I think there was time to ensure he was given an accurate picture. I’m also mindful that the cancellation notice still showed the now completely out of date figure of £141,981. As noted above, Mr L only became aware of the actual transfer value when receiving details of the policy that had been set up.”
A FOS investigator initially rejected the complaint but Mansell upheld it.
He says: “I accept that the transfer value used by Prudential was correct at the time the new plan started, and reflected the reduced bonuses and how these had affected Mr L’s policy. So to that extent he hasn’t suffered an actual financial loss.
“But I think the misleading and unclear information given to Mr L caused him some trouble and upset, which could have been avoided had Prudential taken more care. And I think he should be paid a sum of £400 in recognition of this. I’ve informed Prudential of my view, and acknowledge that it doesn’t agree.”
A Prudential spokesman says: “Prudential accepts the ombudsman’s decision. We do make it clear to customers that the transfer values given are not guaranteed and can change. We understand how these changes may disappoint customers and have introduced a 30-day guarantee for pension transfer quotes.”