David complained about the advice given by a regulated independent financial adviser to transfer the benefits from his defined benefit occupational pension scheme (OPS) – the British Steel Pension Scheme (BSPS) – to a personal pension.

What happened

David felt that the advice was unsuitable and wasn’t in his best interests. He said that it had failed to take into account the regulatory requirements in place at the time of the advice.

The firm which gave the advice didn’t uphold David’s complaint. Although it agreed that once transferred the value of the benefits were unlikely to be able to match what he was entitled to in the OPS, it said David was aware of this at the time and said there were other key reasons behind his decision to transfer.

What we said

When looking into David’s complaint we took account of the rules and regulations that applied when the advice was given. In particular, the Financial Conduct Authority’s requirement that when advising a member of a defined benefits OPS, the firm should start by assuming that a transfer will not be suitable and the firm should only then consider a transfer if they can clearly demonstrate that it is in the client’s best interests.

The firm noted David had concerns about the financial viability of the BSPS and said that he had wanted to retire early, access his pension flexibly through drawdown, repay his mortgage with the maximum available tax-free cash as well as having improved lump sum benefits for a family member.

David was categorised as having a cautious attitude to risk, but the recommended product would need to achieve an annual investment return of over 14% to simply match the scheme benefits he would be giving up by transferring. In order to achieve this rate of investment return, David would have needed to take a level of risk significantly in excess of those he was prepared to take as a cautious investor.

We also found that David’s income requirements were likely to have been met by early retirement within his existing scheme, so we didn’t think this was sufficient reason to transfer away from the OPS. There was no indication that David was experiencing difficulty in making his mortgage repayments. Similarly, it was unclear why David needed such flexibility and so we didn’t think that the flexibility of a personal pension product was a sound justification for the transfer when a steady, guaranteed income from the BSPS would have met David’s income requirements.

Finally, we didn’t think the prospect of a lump sum benefit for David’s family member, by way of transferring to the personal pension, constituted sufficient reason to transfer and lose otherwise valuable guaranteed benefits for David personally.

Taking everything into account we thought that the recommendation to transfer was unsuitable for David. The key contributing factors were his cautious attitude to risk and that the reasons given were not sufficient justification for losing such valuable benefits.

We upheld David’s complaint and told the firm to put him as closely as possible into the position he would be in but for the unsuitable advice. We told the firm to make a redress calculation in line with the pension review guidance as updated by the FCA in its guidance for firms on how to calculate redress for unsuitable DB pension transfers. We told the firm to pay David the resulting compensation amount, up to the applicable maximum of £160,000 and we also recommended that the firm pay the full balance owed if the compensation amount exceeded £160,000.