A university employee has criticised the Financial Ombudsman Services (FOS) after his decision to accept compensation for poor pension advice left him £600,000 out of pocket.
In 1996 John Stevens, reader in decision science at Sheffield University, was advised by Anthony Brabin & Co to transfer out of his defined benefit (DB) pension pension into a private defined contribution (DC) pension.
His DB pension had been run by Wellcome Research Laboratories. When this company was taken over by GlaxoSmithKlein in 1996 Stevens was made redundant. As part of his compensation package the number of years he was deemed to have accrued pension benefits on was doubled to 20 years.
He was subsequently advised to transfer his DB pension to a DC scheme. At the time of the FOS decision in November 2014 the DB pension would have carried a transfer value of £987,000.
Given the DC pot was valued at £211,000 at the time of the FOS decision it said the resultant loss from the transfer was around £776,000.
In 2013 Stevens complained about the advice he received to the FOS. By then, Anthony Brabin & Co had been bought by national advice firm Pantheon Financial Management and renamed Pantheon Financial Investments.
The FOS found in Stevens’ favour. In a final decision notice published in 2014 ombudsman Adrian Hudson said the adviser should have more clearly explained the risks associated with a pension transfer and the benefits Stevens could lose from leaving his DB scheme.
Hudson said too much emphasis was put on the illustrated rate of growth, and if an unbiased conversation had taken place Stevens would probably not have made the decision to leave his final salary pension.
The FOS ordered Pantheon to pay Stevens £150,000, the maximum it can make a business pay out, and also recommended Pantheon pay out over this £150,000 limit.
However, Pantheon only paid out the minimum amount it was required to.
Stevens accepted the FOS decision before he knew the full extent of his losses. This also meant he was unable to later take the claim to court to claim more than the £150,000 he was awarded.
A spokeswoman for the FOS said it always waited for the company to calculate how much had been lost and the complainant could be made aware of this either before or after they accepted the decision.
‘We tend to let the [company] do the calculations of loss themselves and this could be after the client has accepted or rejected the decision. It is then up to [the company] to refund what is appropriate,’ she said.
Stevens said: ‘I knew that my loss was likely to be more than the FOS compensation limit of £150,000 but I did not know by how much and never in my wildest dreams expected it to be as much as it turned out to be.’
According to a fact sheet published on the FOS website, it will sometimes tell complainants to visit the court instead of pursuing complaints through the service.
‘Sometimes we may decide that a complaint involving an amount over the maximum limit might be more appropriately dealt with in court. If we decide this, we won’t continue with the case any further,' it reads.
However, this did not happen in Stevens’ case.
Stevens said his case showed the FOS needed to tell complainants that they should consider court action if their complaint is potentially a lot higher than £150,000.
‘The FOS did not, and could not, advise me that my case "might be more appropriately dealt with in court" because their process does not allow the assessment of the extent of the loss before requiring acceptance of their decision,’ he said.
He also added that he thought the compensation limit should be increased to help customers who lose large amounts of money.
‘For others like me it is time that the compensation limit was increased to protect consumers who do not have the resources to take companies to court,’ he said.
Patrick O’Leary, compliance director at Pantheon Financial, said his firm had not done anything wrong in relation to the complaint.
‘Our position remains that the complaint was not justified. However, the ombudsman issued his decision, we paid to the claimant the maximum sum that the ombudsman was permitted to award and we were under no obligation to pay any additional sums,’ said O’Leary.
The compliance director also pointed out Stevens was not a client of Pantheon after it acquired Brabins, along with its liabilities, in 2001.
‘The former directors of Brabins and the individual adviser concerned are no longer involved in Pantheon Financial Management Limited,’ he added.