Royal London must pay compensation to a client who was given incorrect information about an exit charge, which resulted in them losing money when consolidating their pensions.
In a Financial Ombudsman Service decision, Mr F holds a pension plan with Royal London and says he contacted the firm in January 2017 to ask for details of how the exit fee on his plan tapered over time.
Royal London sent an email to Mr F’s adviser in February 2017 and stated there was no exit fee applicable to Mr F’s plan.
Mr F then arranged to transfer his Royal London pension, and two smaller pensions held with other providers, to a single new arrangement.
However the information given to Mr F was incorrect as an exit charge of around 10 per cent of the value of his plan applied.
Mr F provided evidence to the FOS showing the value of those other plans, and the annual costs he was paying before the transfer compared with what he is paying now.
Based on the value of his funds when they were transferred he is paying approximately £375 per annum more than he would have been if he had not moved those funds.
He no longer wishes to be a client of Royal London and demands it waive the exit charge on the with-profits plan which has a retirement date of 2038.
The policy documentation contains the statement: “If you surrender units, including switching out of the with profits funds, we may apply a market value adjustment to reflect the investment market levels ruling at the date of surrender.”
A market value adjustment is applied to ensure that all policyholders, both those remaining with the fund, and those leaving, receive a fair share of the underlying assets of the fund.
Royal London accepts the information it provided to Mr F’s adviser was incorrect but does not consider it appropriate to waive the exit charge as compensation.
When Mr F first complained Royal London sent him a cheque for £200 in recognition of the upset caused and sent him a further cheque for £750.
Mr F rejected this and the complaint was passed to ombudsman Paul Reilly who says in the circumstances of this complaint the waiving of the exit charge is something for Royal London to decide, rather than FOS.
However he adds it is reasonable Mr F is given around six months from the date of his decision to decide whether to move his other funds to reduce his annual costs.
Reilly also says Royal London should pay Mr F £660 in compensation for the additional charges incurred until the end of 2018 and reasonable costs of any one-off advice he receives in terms of moving the other two pensions to a lower cost provider.
Royal London should facilitate this by providing Mr F with a named point of contact to agree the costs he intends to reclaim and to arrange payment to him on receipt of suitable documentary evidence of the costs.
A Royal London spokeswoman says: “We recognise the decision made by the ombudsman in this case and have adhered to it.”