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SJP to compensate over pension withdrawal error

SJP call centre told client the withdrawal could be processed in five working days

St James’s Place must compensate a client who complained the failure to process a withdrawal from his pension before the end of the tax year led to him paying too much income tax.

Initially, the Financial Ombudsman Service adjudicator did not uphold the complaint, however the complainant asked for it to be reviewed and the ombudsman reversed the decision.

According to the FOS decision, in March 2016, Mr C had asked his adviser if he could take cash from his pension but the adviser said he did not think he could process the withdrawal before the end of the tax year.

Mr C then called SJP where one of the call centre staff said there was a five working-day turnaround to process his request. Mr C was told all he had to do was put his request in an email.

Mr C emailed SJP on 16 March 2016 and was then sent a form asking him to provide more details. He was told that if he wanted his benefits before the end of the tax year SJP would need to receive the form before 4 April.

SJP got the form on 1 April. Mr C was then sent another form and was told his request would not be processed for 10 days.

The Ombudsman upheld the complaint and ordered SJP to pay £300 in compensation for inconvenience caused and also to pay redress for the tax loss suffered as a result of SJP’s actions.

Mr C accepted the Ombudsman’s decision but said he should be fully compensated for losses he would have incurred if he had made all of the withdrawals he had planned.

He said urgent planned house renovations had been postponed for a year because of SJP’s failure and because his “headroom” for the 2015/16 tax year had been lost he would have to take the full withdrawal for the 2016/17 tax year.

He said that because of the 40 per cent tax on this amount this would mean an additional withdrawal of £7,715 would be needed to arrive at the full amount he would have received if he had taken £36,000 in the 2015/16 tax year and £45,000 in the 2016/17 tax year.

Mr C said he should be compensated for paying a higher level of tax on a larger portion as well as for any higher tax applying to the £36,000 that was intended to be paid in 2016/17 instead of 2015/16.

With the £300 for distress and inconvenience, this would total around of £8,000 compensation.

In his final decision, the ombudsman continued to uphold the complaint and explained how he thought Mr C should be compensated.

The decision says: “What I believe Mr C should be compensated for is what extra tax he would have had to pay in 2016/17 on the money that should have been paid in 2015/16. His P60 for 2015/16 indicates income of £5,885.24 which he says was his only income that year. In 2016/17 Mr C says his income was £9,212.39. So it would be whatever additional tax would have been generated by taking the withdrawal in the higher income period.”

It adds: “I require St James’s Place Wealth Management to pay the difference in tax between that which would have been payable had Mr C’s pension withdrawal request been actioned in the 2015/16 tax year rather than the 2016/17 tax year. This will be based on the sums detailed in Mr C’s withdrawal requests received by St. James Place in the 2015/16 tax year.”

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Comments

There are 8 comments at the moment, we would love to hear your opinion too.

  1. Hence why the adviser said they couldn’t do it. A classic example of promising that which you cannot deliver and why clients need to understand that a pension is not like a bank account.

  2. Robert Milligan 4th October 2017 at 3:20 pm

    Don’t you just love it, “Standard Turn Around Times”, managing client expectations, Had the Adviser acted when asked to do the Job for which he is being paid, ie Renewals, of what ever amount, the payment to the client would have be accounted for the previous Tax Year, So its the Advisor who should be paying not SJP, but then again, I suppose that’s why they are a Tied Agent of SJP

  3. Duncan
    Your comment seems to indicate you didn’t actually read the article!
    He approached his adviser on 16th March, which means there were 14 working days (or twelve if Easter got in the way) to the end of the tax year in which SJP could process the withdrawal!
    You don’t need to think a pension scheme should operate like a bank account to reasonably expect this would be long enough to receive your money.
    I bet if the client had asked his adviser if he could pay a large single premium into his pension before the end of the tax year SJP would have had no problem processing it!!!

  4. Given that his adviser said it could not be done, why did he ring the call centre.

    I wonder what he told them.

  5. There is a lesson for us all here, make sure we have regular client reviews and try to plan ahead so that these last minute end of tax year issues do not arise.

    • Regular reviews or not clients constantly surprise us with their lack of time planning. I once had a longstanding client call me whilst I was driving to say that following a meeting with their accountant they needed to make an urgent pension contribution “before their end of financial year” I asked when it was, “End of Today” was the reply.

      Surely the answer would have been for the SJP Adviser to initially say,

      “it is possible that the paperwork may not be sorted in time. what would be the effect of this to you and are you prepared to accept that this may be payable in the next tax year”.

      Follow it up with a personal email to the client detailing both the fact it might not happen and the fact that the client has either agreed to take the chance or declined to accept this possibility. Job done.

  6. What this shows is that the client didn’t trust his adviser, otherwise why would he go behind his back. Secondly why did the call centre not refer this back to the adviser, is it because SJP also don’t trust their representatives

  7. The decision of the FOS to uphold the complaint seems to hinge on a number of bungles on the part of SJP, all it seems due to poor staff training (or incompetence).

    1. The call centre person told Mr C (incorrectly as it turned out) that all he needed to do was submit his request by e-mail and that

    2. the turnaround time to action that request would be only 5 days.

    3. Having received Mr C’s e-mail request, the call centre staff not only sprung a form on him but compounded this by failing to issue the second form (along with the first one) on 16th March.

    Having been issued with the first form and been told by SJP how long it would take to process, why did Mr C fail to ensure that it (that first form) arrived back with SJP at least 5 working days before the end of the Tax Year?

    Even if the turnaround time HAD been 5 (as opposed to 10) working days, by 1st April when Mr C got the form back to SJP, it was too late. SJP could have politely pointed out to Mr C what they’d told him on 16th March and said: Sorry, you didn’t get the form back to us in time. Mr C would then not have had reasonable grounds to complain.

    Instead of keeping schtum, though, SJP shot themselves in the foot by issuing a second form. I don’t see that they have a leg to stand on.

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