Compensation for pension transfer delay
Savers frustrated by financial advisers’ refusal to help them move “final salary” pensions may be able to pursue them for compensation.
The Financial Ombudsman, the arbitration service, has awarded £50,000 to a saver – known only as “Saul” – after the value of his pension dropped while he was awaiting a response from an adviser.
Advisers have been shocked by the decision, as it had been thought that refusing to work with a client gave protection against claims. A quarter of a million people have swapped final salary pensions – which pay a guaranteed income for life – for “defined contribution” plans since George Osborne (pictured) changed the rules in 2015. The latter offer more flexibility and access to cash lump sums, and are more tax-efficient on death.
But under government rules, moving a pension worth £30,000 or more must be signed off by a specialist adviser. Strictly, it does not matter if the adviser recommends a move, but in practice advisers are refusing
to help unless they are confident of approving a transfer. That is the situation Saul found himself in.
He had been given an offer of about £650,000 to give up his company scheme as long as the transfer was completed within 90 days. He spoke to an adviser who, after much chasing, refused to give him advice and suggested he find someone else to help.
The transfer offer expired before Saul could find another adviser who was willing to help. He did eventually manage to move his pension, but in the meantime the transfer value had dropped by £50,000.
After an unsuccessful complaint against the first adviser he went to the ombudsman, who accepted that the adviser had the right to refuse to advise Saul but said it was “not fair or reasonable” to have “taken so long to reach that decision”. It ordered the adviser to pay the difference between the two transfer values plus a few hundred pounds in compensation “to reflect the trouble they’d caused”.
The volume of pension transfers has surged over the past three years, driven partly by the attraction of the “pension freedom” reforms, as well as unusually high transfer offers.
Telegraph Money has been inundated with letters from pension savers who have found it all but impossible to speak to an adviser and as a result are blocked from transferring.
A transfer of £30,000 could equate to a pension expected to pay just £1,000 a year, or even less.