In early 2016, the complainant, referred to as Mr H, met with a new financial adviser following the retirement of his previous IFA.
The adviser recommended to Mr H, who had three personal pensions with a value around £68,500, that he should transfer into a plan with a 5% initial and 1% ongoing adviser charge.
Mr H said he did not receive a suitability report until after the transfer was made.
He said that was the first time he had been aware of the initial charge and wouldn’t have gone ahead if he’d known about it ahead of time.
Intrinsic, which was acquired by Old Mutual in 2014, didn’t uphold the complaint and said he had been made aware of the charge through a variety of documents.
Adjudicator upholds complaint
The adjudicator who investigated the case upheld Mr H’s complaint, saying there was insufficient justification for recommending the transfer and a stakeholder pension would have met his needs.
Intrinsic disagreed, it pointed to the suitability report which explained the reasons for the transfer. The company said it explained the difference in charges between the plans and set out the adviser’s reasons for recommending the transfer.
The adjudicator was not persuaded to change his mind. He said the report suggested that the new plan would have to grow at nearly 2.7% more than the previous plan just to match the benefits.
In addition, he referred to the regulator’s thematic review of the quality of pension switching advice from 2008.
The adjudicator felt that, in this case, there were elements of the criteria the regulator had considered that he thought applied. He didn’t believe the extra cost of the new plan was justified to Mr H or that there was a good reason to switch.
Determining compensation
In determining the compensation, ombudsman Roy Milne said he agreed with the adjudicators ruling and his aim was to put Mr H as close to the position he would be in now if he had been given suitable advice.
To determine this compensation, Milne set out a process where Intrinsic must compare Mr H’s investment with a benchmark self-invested personalised pension (Sipp) and then pay the difference between the fair value and the actual value of the investment.
Intrinsic must also pay Mr H £100 for the disruption caused to his retirement planning.
