Amir got in touch with us when an independent financial adviser told him to transfer his pension fund to another type but didn't think that the advice he was given was right.
Amir, a self-employed accountant, was planning to reduce the number of hours he worked and had four pension policies. Each of them included a guaranteed annuity rate (GAR) option - which meant he would get a guaranteed rate when he eventually bought an annuity with his pension fund.
Amir decided he wanted to check what other options were available to him, so he went to an independent financial adviser for advice.
They advised Amir to transfer the fund values from his pension policies into an income withdrawal arrangement, taking the maximum tax-free cash lump sum and recycling it back as a pension contribution in a new pension policy (as was permitted at the time). That contribution received high-rate tax relief, increasing the value in the new policy.
When Amir eventually retired, he was disappointed with the annuities with the fund he'd built up. He complained to the advisers, saying he would have been better off if he had been able to take the guaranteed annuity rate option offered with his four original policies. Dissatisfied with their response, he complained to us.
What we said
We thought it was likely Amir was financially aware. He took a keen interest in the stock market and had a number of investments, including a portfolio of shares.
He wasn’t dependent on his pension funds to provide for his retirement, and it was clear that he’d been willing to take a risk with his pension – not only when he first sought advice – but also when he took out the annuities. It had been recorded that the his previous plans hadn’t offered the type of investment he was keen to invest in, whilst retaining the GARs.
We saw that, at the time of the IFA’s advice, none of the guaranteed annuity rates offered by Amir’s original policies were competitive compared to those available in the wider annuity market. We also took into account Amir’s circumstances and attitude to risk at the time of the advice. Based on this, we decided that even if he’d been advised not to transfer on the basis of the potential future advantages of the GARs, Amir would have preferred to transfer out because of the opportunity of obtaining better returns in the new pension plans. We didn’t uphold his complaint.