Roger came to us because he felt that the advice he was given about his personal pension plan didn't produce the results they should have.
Roger started a personal pension plan in his mid forties, on the advice of XYZ Ltd. He selected a retirement age of 65, but had no other workplace benefits or personal pension arrangements as he’d been unable to afford making contributions up to that point.
Roger had few other assets, other than modest savings. His record showed him having a cautious attitude to investment risk, and was quoted within the suitability report as not being in a position to lose any money on his pension – as other than the state pension this would be his only retirement provision.
XYZ Ltd recommended that he invest in a mixture of funds, which would offer the opportunity for investment growth, whilst trying to ensure that the value of the pension contributions wouldn’t fall.
When Roger came to retire, financial markets were not performing well, but he needed to start taking his pension and had to convert his pension pot into an annuity. He wasn't happy about the value of his pension, so came to us.
What we said
We looked at the type of pension arrangement recommended and the funds which Roger’s contributions had been invested in. We thought the pension plan itself had been suitable and offered good value at the time in terms of competitive charges.
But whilst we acknowledged that XYZ Ltd had said they'd tried to balance the competing objectives of fund growth with Roger’s need for maintaining the value of his contributions, we felt that not enough attention had been paid to how important it was to maintain the value of his contributions. Roger had been investing in funds with high levels of equity investment, which meant that they were vulnerable to stock marker fluctuations. And this was particularly acute at the time Roger came to retire, which meant that, after 20 years of contributing, his pension pot was worth only a little more than the value of the contributions made. When the effect of inflation was taken into account, Roger's contributions had actually reduced in value.
We felt that a more cautious investing approach – whilst not offering the same return potential as equities – would have been better suited to Roger. So we upheld the complaint - and told the business to compare the actual return Roger had achieved with a benchmark return comprised of lower risk investments.