Peter Stewart Associates Limited · DRN-5750175

The complaint Mr A’s representative has complained, on his behalf, about advice it says he received from Peter Stewart Associates Limited (PSA) to transfer the value of defined pension benefits from an occupational pension scheme (OPS) to a Self-Invested Personal Pension (SIPP). The basis of the complaint is as follows: • The advice to transfer was inappropriate and has resulted in significant losses to Mr A’s fund value. • The advice wasn’t suitable for a person with Mr A’s circumstances (low risk, inexperienced, retail client), and was unlikely to ever benefit him. • The transactions therefore only served the benefits of the adviser and had the effect of incurring unnecessary costs for the client. What happened Mr A has a SIPP with iPensions Group Limited and in October 2016, Mr A transferred benefits he held with Aviva (£94,198.46) into the SIPP in question following advice from a separate financial business, which is based overseas. Mr A has been living overseas since April 2013, using that firm as his local advisers. In November 2016, a separate firm undertook a fact-finding exercise with Mr A to determine his current circumstances and objectives. This noted the following: • He was 50, married, and considered to be in good health. • He had children, but there was no indication as to how many, and how old they were. • He was employed full time. • He wanted to retire at age 65. • He wanted the flexibility of drawdown options. • Maximising a lump sum from his pension scheme wasn’t important to him. • He wanted to understand and control his investments. • Passing his pension fund to his family after death was important to him and having a guaranteed pension for life wasn’t. • He was considered to be a medium risk investor. The information above was shared with PSA which, in December 2016, issued a report setting out Mr A’s options with regard to the transfer. Within the report, PSA didn’t recommend what SIPP Mr A should transfer to, nor did it recommend what investments he should make. It said that this information was to be provided by his local firm of advisers. Mr A’s defined benefits, amounting to £94,349.78, were transferred into the SIPP that was established the year before, in February 2017. A further transfer was made into the SIPP at some point during 2018 following advice Mr

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A received from a separate business. The amount transferred was in the region of £202,188. Mr A’s complaint against PSA arises from the transfer he completed in February 2017. Mr A’s representative emailed PSA the bulleted points set out above on 7 May 2024, asking it to consider its liability in the matter, and to provide Mr A with an offer of redress before it contacted our service. On 29 May 2024, PSA responded, explaining that Mr A’s complaint letter contained very little detail, and in order for it to provide a final response, it needed a copy of Mr A’s SIPP statements and valuations since the transfer, and details of the investments Mr A made. There was no response to the above. Instead, on 2 July 2024, the representative contacted our service for matters to be considered. When contacting PSA for its file, its own representative responded. It said that Mr A’s complaint was one that had been brought to our service too late. In support of this, it said that the event in question took place more than six years before the complaint was raised and the “limitation point” for the three-year period in which he became aware or ought reasonably to have become aware he had cause for complaint was before 7 May 2021. PSA’s representative added that PSA’s advice was given on the basis that Mr A was a medium risk investor, as outlined in the suitability report, and Mr A couldn’t have it both ways. Either he was a medium risk investor, and any complaint must be looked at on that basis, or he was, as he now asserted, a low-risk investor and he’d been advised on an incorrect and unsuitable basis. The representative continued by mentioning that an email was sent to Mr A in November 2017 advising him of a slight change to his critical yield, and at that point PSA considered Mr A’s attitude towards risk as low to medium. As this was different to Mr A’s view that he was a low-risk investor, the potential that the advice he received was unsuitable would have been highlighted by this email, alerting him to the potential of having cause for complaint. It also said the email flagged that the FCA had concerns about pension transfers going ahead that may not have been in consumers’ best interests. The representative further drew attention to the critical yield, and the warnings that were provided around this. In regard to the allegation Mr A had suffered significant losses, it said it was inconceivable that he had no information about this or valuations of his investments in the four-to-five-year period prior to the limitation date. Mr A would have been able to see his pension funds weren’t achieving the 4.4% year on year return on his investments which had been required to match the scheme benefits. And with regard to the complaint about “unnecessary costs”, it said Mr A should provide a copy of his statements detailing the charges involved, and this would demonstrate he had awareness of these, and undoubtedly conclude his complaint was one that was time-barred. PSA has for its own part said that this case is one of a “two-adviser model”, and that Mr A had his own overseas financial adviser - the firm that advised him in 2016 regarding the first transfer. It said that, in order for any transfer from a defined benefits pension scheme to be completed, an individual would need financial advice from a company that was regulated by the Financial Conduct Authority (FCA). PSA asserted that its only involvement was the

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review of the potential pension transfer. It had no ongoing relationship with Mr A, so it wasn’t involved with any annual reviews, nor did it receive any ongoing charges. Having firstly considered the matter of jurisdiction, our investigator thought that it was one which this service could consider. He said the following in summary: • This service was bound by the rules which are set out by the Financial Conduct Authority’s (FCA) Handbook, under the dispute resolution rules (DISP). These rules set out that we can’t consider a complaint if it has been referred to our service more than: o Six years after the event complained of; or (if later) o Three years from the date on which the complainant became aware (or ought reasonably to have become aware) that he had cause for complaint; …Unless: o In the view of the Ombudsman, the failure to comply with the time limits in DISP 2.8.2R or DISP 2.8.7R was a result of exceptional circumstances • The event in question took place in February 2017, which was more than six years before the complaint was raised. That said, for the purposes of the second limb of the DISP rule, he’d considered when Mr A became aware or ought reasonably to have become aware he had cause for complaint. • When asking Mr A why he had only raised a complaint more recently, he explained that a different firm told him recently there may be an issue with the advice he received previously. His details were then passed on to his current representative, which raised further enquiries. • Although PSA had said that Mr A’s complaint was poorly specified, it was clear that the fundamental basis for his complaint was that the transfer was unsuitable because he was a low-risk investor, that the investment caused Mr A to incur unnecessary costs, and to suffer significant losses. • The investigator had asked Mr A’s representative to provide him with copies of Mr A’s annual statements to see whether these could help shed further light on when he became aware, or ought reasonably to have become aware, that he had cause for complaint. • The investigator had seen a statement, which had a pension fund value of £188,510 as at 31 December 2016. This was prior to the transfer Mr A had complained about. A statement from 13 October 2018 said that Mr A’s pension was valued at £373,649. The following year, on 12 May 2019, his pension was valued at £385,816. For the next three years (2020-2022), Mr A’s pension value was valued at £422,673.62, £457,913.21 and £410,429.36 respectively. But he’d not been provided with a statement for 2023 or 2024. • Whilst Mr A transferred a further pension into his SIPP, which contributed to the plan’s value increasing, Mr A witnessed his plan’s value increase until the year of 2022. It wasn’t reasonable to expect Mr A to separate each transfer and calculate what these would have grown by individually, and then compare this to the critical

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yield shown in PSA’s suitability report. Mr A’s statements weren’t enough to have made him aware he had cause for, or ought reasonably to have cause for, complaint. • Mr A’s complaint was brought to this service by a representative. It was the party which mentioned Mr A’s attitude towards risk and the costs involved. Mr A’s complaint was simple, and was that the advice he received was unsuitable. • Complaints were rarely raised about advice a consumer may have received unless they were able to see losses, or they’d been told by someone more experienced in such matters that they’d been badly advised. If a pension plan was increasing in value, the costs involved wouldn’t be at the forefront of a consumer’s mind, nor would how their attitude towards risk had been categorised. But these were in any case points Mr A’s representative had put forward, rather than Mr A himself. • On 26 November 2017, PSA sent Mr A correspondence reiterating why it felt the transfer it recommended remained suitable. A consumer wouldn’t be expected to raise a complaint following reassurance that there was nothing to be concerned about. And it seemed that the overseas advising firm was responsible for further transfers following what happened in 2016/17. And so it was very likely that that firm reassured Mr A too. In summary, the investigator said that, in order to conclude that this complaint had been raised too late, there would need to be more definitive evidence that Mr A either became aware or ought reasonably to have become aware that he had cause for complaint before the involvement of his representative. But he wasn’t convinced that this was the case based on the points raised by PSA. With regard to the merits of the case, the investigator said the following: • As mentioned in the background to the case, the advice Mr A received formed part of a two-adviser model. PSA had said that its only involvement with Mr A was the review of the potential pension transfer. • The fact-finding exercise provided to this service was undertaken by a different firm. This was done a month before the suitability report was concluded. This showed that Mr A was 50 years of age at the time of advice, he wanted to retire at age 65, he wanted the flexibility of drawdown options, and that maximising a lump sum from his pension scheme wasn’t important to him. Mr A wanted to understand and control his investments and passing his pension fund to his family after death was important to him. It was noted that having a guaranteed pension for life wasn’t important to Mr A. • It seemed that this separate firm, which operated in the UK, acted as a go between for PSA and Mr A’s local financial adviser. That firm wasn’t regulated by the FCA. • The benefits Mr A had accrued in the defined benefit pension scheme offered a guaranteed income with virtually no risk for life and would form a significant part of Mr A’ total pension provision. Whilst Mr A had other sources of income he could rely on in retirement, and he’s said having a guaranteed pension for life wasn’t important to him, the security of guaranteed benefits offered by the OPS would be important to the majority of people. • The fact-finding exercise didn’t confirm what assets Mr A had, and neither did the report we’d been given.

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• COBS 9.2.2 sets out the following: “A firm must obtain from the client such information as is necessary for the firm to understand the essential facts about him and have a reasonable basis for believing, giving due consideration to the nature and extent of the service provided, that the specific transaction to be recommended, or entered into the course of managing: o Meets his investment objectives; o Is such that he is able financially to bear any related investment risks consistent with his investment objectives; and o Is such that he has the necessary experience and knowledge in order to understand the risks involved in the transaction or in the management of his portfolio.” • It was unclear as to how PSA could conclude what risk Mr A was able to bear without knowing what his assets were. The investigator wasn’t therefore satisfied that Mr A had the capacity to lose such an important benefit. • When considering whether to transfer a defined benefits, the regulator – the FCA – had made it clear that an adviser should – as a starting point – assume that transferring would be unsuitable unless it could clearly be demonstrated to be in the client’s best interests: "When advising a retail client who is, or is eligible to be, a member of a defined benefits occupational pension scheme or other scheme with safeguarded benefits whether to transfer, convert or opt-out, a firm should start by assuming that a transfer, conversion or opt-out will not be suitable. A firm should only then consider a transfer conversion or opt-out to be suitable if it can clearly demonstrate, on contemporary evidence, that the transfer, conversion or opt-out is in the client's best Interests." (COBS 19.1.6) • Whilst the report provided to Mr A did cover the risks involved with transferring, it didn’t give the impression that the above was its starting point. • PSA gave its recommendation to Mr A in 2016. This was a few years after the regulator had made its position clear that, when assessing the suitability of a pension transfer, a firm needed to also consider the suitability of the underlying investments intended to be held in it. This was evident in 2013 when the regulator at the time issued an alert regarding advice to invest in SIPPs and other pension wrappers. The relevant part said the following: “It has been brought to the FSA’s attention that some financial advisers are giving advice to customers on pension transfers or pension switches without assessing the advantages and disadvantages of investments proposed to be held within the new pension. In particular, we have seen financial advisers moving customers’ retirement savings to self-invested personal pensions (SIPPs) that invest wholly or primarily in high risk, often highly illiquid unregulated investments (some of which may be in Unregulated Collective Investment Schemes) … The FSA’s view is that the provision of suitable advice generally requires consideration of the other investments held by the customer or, when advice is given on a product which is a vehicle for investment in other products (such as SIPPs and other wrappers), consideration of the suitability of the overall proposition, that is, the wrapper and the expected underlying investments in unregulated schemes. It should

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be particularly clear to financial advisers that, where a customer seeks advice on a pension transfer in implementing a wider investment strategy, the advice on the pension transfer must take account of the overall investment strategy the customer is contemplating.” • In 2014, the FCA issued a further alert containing similar warnings. This said the following: “Where a financial adviser recommends a SIPP knowing that the customer will transfer or switch from a current pension arrangement to release funds to invest through a SIPP, then the suitability of the underlying investment must form part of the advice given to the customer. If the underlying investment is not suitable (…), then the overall advice is not suitable. If a firm does not fully understand the underlying investment proposition intended to be held within a SIPP, then it should not offer advice on the pension transfer (…) at all as it will not be able to assess suitability of the transaction as a whole.” • Furthermore, in January 2017 (before the transfer completed in February 2017) the FCA issued a further alert entitled ‘Advising on pension transfers – our expectations’. The FCA said the following: “We are aware that some firms have been advising on pension transfers or switches without considering the assets in which their client’s funds will be invested. We are concerned that consumers receiving this advice are at risk of transferring into unsuitable investments or – worse – being scammed. Transferring pension benefits is usually irreversible. The merits or otherwise of the transfer may only become apparent years into the future. So it is particularly important that firms advising on pension transfers ensure that their clients understand fully the implications of a proposed transfer before deciding whether or not to proceed. What we expect: We expect a firm advising on a pension transfer from a defined benefit (DB) scheme or other scheme with safeguarded benefits to consider the assets in which the client’s funds will be invested as well as the specific receiving scheme. It is the responsibility of the firm advising on the transfer to take into account the characteristics of these assets. Our rules set out what a firm must do in preparing and providing a transfer analysis. In particular, our rules (COBS 19.1.2R(1)) require a comparison between the likely benefits (on reasonable assumptions) to be paid under a DB scheme or other scheme with safeguarded benefits and the benefits afforded by a personal pension scheme, stakeholder scheme or other pension scheme with flexible benefits. The comparison should explain the rates of return that would have to be achieved to replicate the benefits being given up and should be illustrated on rates of return which take into account the likely expected returns of the assets in which the client’s funds will be invested. Unless the advice has taken into account the likely expected returns of the assets, as well as the associated risks and all costs and charges that will be borne by the client, it is unlikely that the advice will meet our expectations (see guidance at COBS 19.1.2 and 19.1.6-19.1.8).”

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• The FCA went on to say firms shouldn’t undertake a comparison using generic assumptions for hypothetical receiving schemes. The firm must take into account the likely expected returns of the assets in which the client’s funds would be invested as well as the specific receiving scheme. • On the basis of the available evidence, the investigator wasn’t persuaded that PSA had assessed the intended underlying investments. Therefore, he thought that the advice fell short of the rules and guidance referred to above. • In terms of the financial viability of the transfer, the advice was given during the period when the Financial Ombudsman Service was publishing 'discount rates' on our website for use in loss assessments where a complaint about a past pension transfer was being upheld. Whilst businesses weren't required to refer to these rates when giving advice on pension transfers, they provided a useful indication of what growth rates would have been considered reasonably achievable when the advice was given in this case. • The investment return (critical yield) required to match the occupational pension at retirement was 4.45% pa. This compared with the discount rate of 4.42% pa for 14 years to retirement in this case. Whilst PSA may have considered this critical yield to be achievable, it was important to note that critical yields had been based on assumptions and hypothetical SIPP fees. This was something the FCA specifically warned about in early 2017. • And PSA couldn’t say with any certainty whether the critical yield was likely to be achieved based on its own acknowledgement that it hadn’t considered what the funds would be invested in. Without considering the investment Mr A intended to make, it would have been impossible to give an opinion on whether or not the critical yield could be met. And as PSA was unable to give any view on whether the transfer was financially viable, it shouldn’t have recommended the transfer. • With regard to other reasons for transferring, a recommendation to transfer might not be made solely on the basis that the critical yield was achievable. In terms of “flexibility”, usually, where a consumer has been recommended to transfer their secure and valuable pension benefits, it would typically be the case that they were doing so because they wanted to access the available tax-free cash (TFC) immediately. That TFC would then commonly be used to pay off debts or to pay for something of significance. • Mr A was 50 at the time of advice, so that wasn’t a possibility right away. There were still five years until Mr A could access his funds at age 55. Whilst Mr A may have wanted to have a pot of money he could draw on as and when, this wasn’t a pressing need. • One of the reasons recorded for transferring was so that Mr A could control his investments. But prior to transferring this defined benefit pension scheme, Mr A had made one other transfer into his SIPP. And it was the investigator’s understanding that the separate firm was helping him choose his investments, and the transferred funds were used to buy an Executive Redemption Bond with Old Mutual Wealth. • Mr A didn’t have personal investment experience himself. So, if he were to ever stop using the services of that firm, as he did, in 2020, he wouldn’t have the necessary experience to deal with matters himself. Had Mr A not transferred his defined benefits, he wouldn’t have to take an active role in achieving the benefits promised to

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him. Rather, the scheme would pay out a guaranteed sum at his retirement date, and the additional costs stemming from employing a financial adviser wouldn’t have been incurred. • COBS 9.2.2 required a firm to ensure that its client has the knowledge and experience to understand the risks involved. But PSA didn’t know what Mr A was going to invest in. So, they didn’t know whether or not he understood those risks. And therefore, giving Mr A the control of where his investments were going to be made, without knowing what that was, may not have been in his best interests. • PSA was recommending that Mr A transfer his funds from a scheme where he had no control over his funds to one where he could invest in a large range of investments, whether suitable or not. It was for that reason that the FCA warned against firms recommending a transfer without considering where the funds were being invested. In failing this requirement, PSA didn’t act in Mr A’ best interests. • Mr A may have been attracted by the prospect of higher death benefits, as was noted as an objective. But PSA shouldn’t have encouraged Mr A to prioritise the potential for higher death benefits through a SIPP over his own security in retirement. Further, Mr A’ defined benefit pension scheme would have had a 50% spouse benefit. And if Mr A was genuinely concerned about the death benefits available, then PSA should have discussed the possibility of taking out life cover to create a legacy fund. • The report PSA issued specifically said that choosing which specific QROPS or SIPP, and investment considerations, had not formed any part of its own recommendation. But it was unclear as to how it could conclude that the transfer was suitable without taking into consideration the underlying recommended investments. • In the investigator’s opinion, by acting as it did PSA was in breach of COBS 2.1, COBS 9.2, PRIN 2, 6, and 9. The first required a firm to act honestly, fairly, and professionally in accordance with the best interests of its client. The second said that a firm needed to obtain the necessary information regarding its client’s knowledge and experience in the investment field, financial situation and objectives. The three PRIN rules quoted required a firm to conduct its business with due skill, care and diligence, to pay due regard to the interests of its customers and treat them fairly. And finally, a firm must take reasonable care to ensure the suitability of its advice and discretionary decisions for any customer who is entitled to rely upon its judgment. • It was understandable as to why transferring may have seemed attractive to Mr A. However, it wasn’t PSA’s role to simply transact what Mr A (or what a separate firm) wanted. It had to understand what would have been in Mr A’ best interests and make a suitable recommendation on this basis. And it couldn’t disregard what investment choices would be made following its recommendation. • PSA’s advice to transfer wasn’t suitable. It failed to demonstrate that there was a compelling need which meant transferring was in Mr A’ best interests, and to justify relinquishing the guaranteed, risk-free benefits. As such, the investigator recommended that the complaint be upheld. • PSA should have advised Mr A to retain his defined benefits. The investigator was persuaded that, had PSA made it clear that transferring wasn’t in his best interests and explained that there wasn’t the same protections in place should something go wrong, he would have accepted this advice, and kept his pension where it was. The

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evidence didn’t support the position that Mr A would in any case have proceeded on an insistent client basis. In terms of putting things right, the investigator said the following: • A fair and reasonable outcome would be for PSA to put Mr A, as far as possible, into the position he would now be in but for the unsuitable advice. The investigator was persuaded that Mr A would have likely remained in the DB Pension Scheme. • PSA should therefore undertake a redress calculation in line with the rules for calculating redress for non-compliant pension transfer advice, as detailed in Policy Statement PS22/13 and set out in the regulator’s handbook in DISP App 4. • Mr A hadn’t retired yet, and he had no plan to do so at present. So, compensation should be based on the defined benefit scheme’s normal retirement age of 65, as per the usual assumptions in the FCA guidance. • The calculation should be carried out using the most recent financial assumptions in line with PS22/13 and DISP App 4. In accordance with the regulator’s expectations, the calculation should be undertaken or submitted to an appropriate provider promptly following receipt of notification of Mr A’ acceptance. • If the redress calculation demonstrates a loss, as explained in PS22/13 and set out in DISP App 4, PSA should: o calculate and offer Mr A redress as a cash lump sum payment, o explain to Mr A before starting the redress calculation that: ▪ redress will be calculated on the basis that it will be invested prudently (in line ▪ with the cautious investment return assumption used in the calculation), and ▪ a straightforward way to invest the redress prudently is to use it to augment ▪ the current defined contribution pension ▪ offer to calculate how much of any redress Mr A receives could be used to augment the pension rather than receiving it all as a cash lump sum, • if Mr A accepts PSA’s offer to calculate how much of the redress could be augmented, request the necessary information and not charge Mr A for the calculation, even if he ultimately decides not to have any of the redress augmented, and take a prudent approach when calculating how much redress could be augmented, given the inherent uncertainty around Mr A’ end of year tax position. • Redress paid directly to Mr A as a cash lump sum in respect of a future loss would include compensation in respect of benefits that would otherwise have provided a taxable income. So, in line with DISP App 4.3.31G(3), PSA may make a notional deduction to allow for income tax that would otherwise have been paid. Mr A’ likely income tax rate in retirement was presumed to be 20%. In line with DISP App 4.3.31G(1), this notional reduction may not be applied to any element of lost tax-free cash. Mr A’ defined benefits constituted his main pension and finding out that he hadn’t been suitably advised would have been distressing. Given that, the investigator recommended that PSA Mr A £300 additional compensation.

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PSA disagreed, however, saying the following in summary with regard to jurisdiction: • The relevant test for deciding jurisdiction was whether, viewed objectively, circumstances justified a complainant looking into matters to consider if the advice given was suitable. Another ombudsman in a different case against PSA had recently said in a decision about jurisdiction that “Reasonable awareness doesn’t mean knowing for sure something has gone wrong, it’s information or knowledge sufficient to alert the consumer that something might be wrong.” • It would have been evident to Mr A more than three years before he raised his complaint that he hadn’t been advised on the basis that he was a low-risk investor, which was cited as part of the overall complaint that the transfer was unsuitable. • It would also have been evident to Mr A that his pension fund wasn’t achieving the required critical yield he was told was necessary just to match (let alone exceed) the scheme benefits (so he would have been better off remaining in the scheme). • It would also have been clear to Mr A that he was incurring the “unnecessary” costs about which he’d now complained. Mr A also received correspondence from PSA in November 2017 raising various issues with regards to his position. • With specific regard to the matter of Mr A being described in the complaint as a low risk investor, it was without doubt clear that Mr A received information that he was not being advised by PSA on the basis of being a low-risk investor well before the “limitation date” (7 May 2021) – both at the point of the 2 December 2016 suitability report from PSA, in which he was referenced as a medium-risk investor and in its November 2017 e-mail noting him as being low-medium risk. • Both pieces of evidence pointed to Mr A’s attitude to risk being incorrectly assessed and it was central to his complaint that he was in fact a low-risk investor with a low attitude to risk. • Therefore, information pointing out to a low-risk investor that he had been (incorrectly) assessed as having a higher risk profile must constitute knowledge for the purposes of DISP 2.8.2(2)(b) in terms of raising a question mark over the advice received on that incorrectly risk assessed basis. • It didn’t understand the point made by the investigator relating to Mr A’s attitude to risk and that which had been attributed to him by his representative when making the complaint. Mr A was complaining that the advice was unsuitable and part of that complaint was that he was actually a low-risk investor. • The fact that Mr A’s representative had set that out (which would have had to be on instructions) was wholly irrelevant. Unless the Investigator was asserting that Mr A wasn’t in fact a low-risk investor, then this case involved a low-risk investor receiving information indicating that he had been advised on the basis of an inaccurate ATR and any analysis regarding DISP 2.8.2(2)(b) had to be based on that position. • It wasn’t enough to assert that the content had been articulated by the representative rather than Mr A, and so wasn’t relevant. This wasn’t an approach it had ever seen this service take in response to any case involving a representative. The complaint was the complaint and a complainant stands or falls (including on jurisdiction) on the basis of the arguments they or their representatives make on their behalf.

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• With particular regard to the critical yield, the suitability report contained an extremely clear explanation around the critical yield and Mr A received information in the report and in November 2017 from which it was evident that, in order just to match the benefits being given up from the scheme, the portfolio of investments in the SIPP would have to grow year on year by 4.45%. • Given that the suitability report also included a very clear table from which it was also evident that a low-risk investor could not reasonably expect to receive annual returns at or above 4.45%, it must have been clear that a transfer would not be in Mr A’s best interests as a low-risk investor. • Mr A could not resile from the position that he considered himself to be a low-risk investor, in which case it must have been apparent at the time of the report and when reiterated in November 2017 that the critical yield required would likely not be achievable. • That must, viewed objectively, justify a customer looking at the advice received – and therefore knowledge for the purposes of DISP 2.8.2(2)(b) would begin. As set out previously, it was wholly unreasonable to seek to remove from any jurisdiction consideration what this service was told by a complainant’s professional representative. • In terms of the allegation that Mr A had suffered losses, he must have appreciated before the limitation date that his pension funds weren’t achieving a 4.4%/4.5% return year on year. That must again constitute knowledge of an issue (that he wouldn’t be able to match the scheme benefits in retirement) for the purposes of DISP 2.8.2(2)(b), which is why the information about investment return was relevant. • The approach of the investigator had been to suggest that, because there was more than one transfer into the SIPP and there appeared to be an overall upwards direction of travel, there could have been nothing to indicate any potential issue for the purposes of DISP 2.8.2(2)(b) and that it wasn’t reasonable for Mr A to separate each transfer and calculate what these would have grown by individually. • But this wasn’t what was being suggested. Mr A’s pension investments were collected together in a SIPP and invested, so it is only the overall investment return that was relevant. If, viewed objectively, the SIPP statements did reasonably indicate that the 4.5% return wasn’t being achieved year on year, this would be sufficient to constitute knowledge of a potential issue with the suitability of the transfer (aiming to achieve year on year returns above that level) and for the purposes of DISP 2.8.2(2)(b). • Looking at the statements provided, in fact it should have been evident to Mr A that his SIPP wasn’t generating the required returns to match or exceed the critical yield of 4.44/4.45% pa and this would not involve poring over statements or undertaking complicated calculations. The SIPP statements were clear and easy to read and provided headline figures at the outset from which performance could be seen. • The October 2018 statement clearly demonstrated that after two years, the SIPP was worth less than the contributions into it. Every single element of the SIPP had lost between 4.64% and 18.14%.

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• An investment loss of almost £15,000 after two years would make it clear that the required positive return of 4.44% pa wasn’t being achieved. A low risk investor also wouldn’t expect to see a 5% drop in just one quarter. • The January and May 2019 statements similarly showed that the SIPP was still worth less than the contributions into it. All elements bar one had produced a negative performance. • There was one further statement from January 2020 before the limitation date, which demonstrated a positive return. But this wouldn’t undermine the knowledge which Mr A would reasonably have acquired through earlier statements that losses had been incurred – the opposite of the 4.44% pa return which needed to be achieved to match the scheme benefits. • Further, as the first two valuations showed a reduction in value by mid-October 2018 and then a further reduction in value by the end of January 2019, the investigator’s statement that Mr A could still only see his plan’s value increase until the year of 2022 was incorrect. • When the pattern from the date of the transfer to the limitation date was considered, the pattern was very different to that suggested by the investigator and must objectively have constituted knowledge of an issue for an investor who understood that he required a 4.44% return every year just to match the scheme benefits. • The performance of the SIPP after the limitation date, although referenced by the investigator and somewhat volatile, wasn’t relevant to the question of limitation and knowledge prior to the limitation date. • In terms of the issue of costs, again, the investigator’s comment that it was Mr A’s representative which referenced costs and so therefore excluded this issue from consideration in the context of limitation wasn’t understood. However, it was evident that, although there was some costs information in the valuations documents, it wasn’t referenced with sufficient particularity to create knowledge for the purposes of DISP 2.8.2(2(b). • It wasn’t known what additional costs information was disclosed to Mr A on an ongoing basis, but, in light of the other clear limitation points raised, this point wasn’t being pursued further. • With regard to the November 2017 correspondence, the investigator’s response threw significant further doubt on the extent to which the approach taken to the complaint to date has been appropriately balanced. The investigator had said that this letter represented correspondence in which PSA said that it felt the transfer remained suitable. But this wasn’t a balanced view of the correspondence. • In fact, the November 2017 letter did the following: o Reiterated that the critical yield was unlikely to be achieved by a low to medium risk investor – meaning the scheme benefits would be unlikely to be matched in retirement on the basis of Mr A’s investments and attitude to risk, although Mr A had now said that he was even lower risk than this letter highlighted, making the required returns even less likely to be achieved; o Set out the factors provided in the relevant fact find which it was felt outweighed

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the inability to match the critical yield and justified a transfer; o Highlighted that there was a regulatory review by the FCA of defined benefit pension transfers and concern on the part of the FCA that transfers were taking place when not in the best interests of the relevant scheme member; o Advised that the FCA review had caused PSA to revisit all reports and also to re- run critical yield calculations; o Indicated that, although PSA considered that the transfer out of the scheme was suitable for Mr A, he may wish to seek independent advice to review his pension. • This couldn’t reasonably be categorised as a simple reiteration of the suitability of the transfer. Instead, PSA was saying that it considered the transfer to be suitable (even though Mr A may not achieve the critical yield) but he should be aware that the industry regulatory was concerned about transfers like his – and he may therefore wish to take independent financial advice. • On the basis of such correspondence, it might objectively be considered reasonable that such correspondence would at least raise the prospect of there being an issue with the advice given to Mr A, so as to justify beginning a train of enquiry. And this was the case even without taking into account the letter’s reiteration of the (apparently) incorrect risk profiling of Mr A and the potential for Mr A’s benefits in retirement to fall below those which would have been provided by the scheme. • Although the other case which was decided by an ombudsman may have different facts, they didn’t exist in a vacuum and the same principles could apply to different cases in precisely the same way that the views of judges in one case are applied to other cases, notwithstanding differing facts. • This was endorsed by this service’s website which said that “our ombudsmen work together in professional practice groups to make sure we’re consistent in our thinking and approach”. And this expectation had also been emphasised by the Courts in R (Aviva Life & Pension) v FOS, in which Mr Justice Jay said that: “..the common law requires consistency: that like cases are treated alike. Arbitrariness on the part of the ombudsman, including an unreasoned and unjustified failure to treat like cases alike, would be a ground for judicial review.” • Whilst the 2017 correspondence in that separate matter highlighted a slightly increased critical yield and looked at potential reinvestments, the principle relevant to this case was clearly set out by the ombudsman as follows: “In my view, receiving a letter explaining that advice given only six months previously had been subject to a “strategic review” is likely to prompt some concerns, particularly when that advice related to giving up the guaranteed benefits of a final salary pension. I think a reasonable reaction would at least involve re-visiting the recommendation in light of this new information.” • The November 2017 letter from PSA to Mr A also highlighted PSA’s review of its entire advice book, including the advice given to Mr A less than a year earlier. It further explained that this review arose from FCA concerns about the suitability of DB pension transfers and suggested that, as a result, Mr A may wish to seek independent advice to review his pension.

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• The ombudsman’s decision in the separate matter was therefore relevant to this case and the principle that notice of a review in short order of advice previously given (leaving aside the explicit reference to FCA concerns) ought to prompt a review of the advice (as even suggested by PSA) should be applied in this case and result in knowledge being established (by November 2017) for the purposes of DISP 2.8.2(2)(b). With regard to the merits of the case, PSA said the following: • As a starting point it was necessary to consider the extent of PSA’s retainer and the nature of the transaction as a whole. Mr A was an overseas resident. This therefore precluded PSA from advising him directly in his country of residence, where it was not authorised to provide advice. Such advice was provided by his local firm, which included advice as to whether or not to transfer out of the defined benefit scheme. • PSA’s role was limited to providing the separate firm with certain information pertinent to its advising Mr A generally in his country of residence, to be read in conjunction with the Pension Transfer Report. This was consistent with the regulatory expectations at the time (December 2016), which had been highlighted by the FCA in PS15-12 and recognised the difficulties for overseas clients of having to have input from a domestic (i.e. non-UK) firm, whilst requiring input from a firm in the UK as to “the implications of proceeding with the Transfer” (p.7). • The above input was precisely what PSA provided. It produced a generic report which set out the implications for Mr A of the potential transfer. What PSA did not do – and what it was not required to do – was to provide Mr A with a personal recommendation as to the suitability of proceeding with a transfer out of the Scheme (i.e. whether or not to transfer). Had the firm been giving a personal recommendation, it was accepted that it would therefore have had to take into account all the client’s circumstances for the purposes of assessing suitability under COBS 9. But that wasn’t the case and the FCA requirement to advise on pension transfers by means of a personal recommendation only came in in 2018. The investigator’s reliance on COBS 9.2 and the issues arising from that was therefore misplaced. • As at the material times, PSA acted entirely in accordance with the regulatory expectations for overseas clients. It produced clear guidance (to the domestic adviser) about the implications of a potential transfer and then it was for the local overseas advising firm to advise Mr A whether or not to proceed with the transfer (i.e. to give the personal recommendation). In the event, the local firm evidently did advise Mr A to transfer. It was this model that the FCA reviewed with PSA in 2017 and the FCA didn’t find that it was unsuitable at the time, even if it suggested changes to the model going forwards, in light of later rule changes. • At no point prior to the transfer did PSA have contact with Mr A and it did not discuss the potential transfer with him. In the circumstances, it was never part of PSA’s remit to advise Mr A as to whether or not to transfer, nor was PSA permitted to do so, given his overseas residency. • If Mr A now took issue with advice he received to transfer out of the scheme, that was a matter for the overseas adviser and not PSA. PSA did precisely what it was engaged and required to do – namely to produce a report on the implications of transferring. What the overseas adviser and/or Mr A did with that report, in terms of

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advising on and taking a decision about whether or not to transfer out of the scheme, was between Mr A and that advising firm. • The investigator’s assessment repeated the notion that PSA wrongly recommended a transfer out of the scheme, but the fact is that they it didn’t recommend a transfer. • Furthermore, even when considering the advisory regulatory requirements in place at the time, it was evident from a review of COBS 19.1 that the critical advice requirement was that the scheme member should have an appreciation of how their benefits might look upon a transfer, compared to how they might look if the member stayed in the relevant scheme. • The key instrument for the above analysis in practice was the TVAS and, within that document, the critical yield, which would highlight the likely rate of return required to match the scheme benefits. That was a straightforward way in which a scheme member could understand whether or not they were likely to obtain better benefits upon a transfer or by staying in the relevant scheme. This was no doubt why a standard element in this service’s assessment of the suitability of transfer advice to this day remained a comparison of the critical yield against loss assessment discount rates. • Accordingly, even if criticism could be levelled at aspects of the information gathering of PSA, the most important consideration in this case must be whether it would have been evident to Mr A that not a transfer might result in greater benefits - or not - compared to the scheme. • There couldn’t have been any doubt from PSA’s December 2016 report that Mr A was able to make an informed decision on the potential transfer based on understanding how the benefits upon a transfer might compare to remaining in the scheme. • The meaning of the critical yield was very clearly explained in the report, as was the manner in which the critical yield would indicate whether Mr A might be better off transferring or not. • Further, the report set out, again very clearly, what sort of returns could reasonably be expected across various risk profiles and investment horizons. Although there was a dispute as to Mr A’s attitude to risk, PSA reasonably understood, based on the information provided, that he had a medium attitude to risk. His investment span was over ten years and so, considering the table in the report, the advice was that a reasonable rate of return would be in the region of 4.5 – 5%, which was in excess of the critical yield and therefore potentially achievable. • Accordingly, Mr A would have understood that the potential returns achievable upon a transfer could mean that he would be in a position to exceed the benefits payable from the scheme at retirement, but that this couldn’t be guaranteed. The point was that PSA undertook a reasonable comparison as per COBS 19.1.6 and Mr A understood the position. • PSA therefore acted compliantly at all times and there was no basis upon which to uphold any complaint against the firm. • PSA understood that Mr A would be invested in accordance with the stated attitude to risk and, further, when it received additional information around the investments

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recommended by the overseas firm in 2017 and very slightly amended the critical yield in its correspondence to Mr A, it confirmed that the stated recommendations were suitable. So, even if the view was that PSA should have been clearer on the nature of the investments in 2016, that would not have affected its report, nor the outcome of this complaint. • In terms of “causation”, even if this service took the view that additional information ought to have been provided by PSA (which was in any case denied), the fact was that it would likely have made no difference to the outcome in this matter. • Mr A was being advised by the overseas firm and that advice was predicated upon an investment of funds through a SIPP. In light of the low critical yield, the most likely scenario in the event that PSA advised against a transfer (on the grounds set out by the investigator), was that Mr A would have proceeded regardless. The investigator wasn’t persuaded to change his view, however, saying the following in summary: • The email that was sent to Mr A on 26 November 2017 said that PSA considered the advice provided to Mr A in December 2016 to transfer his defined benefits to a SIPP with Momentum to still be suitable. This was therefore reiterating the advice he’d previously received, and this wouldn’t be a point at which Mr A ought reasonably to have been aware he had cause for complaint. • The point he was making about the statements Mr A received was that it would have been difficult for Mr A, as someone who wasn’t experienced with such matters, to differentiate what investments were related to the different pension transfers when looking at his statements. • Where he’d said that the value of Mr A’s SIPP increased, he’d meant that, by transferring in further pensions, the value detailed on his SIPP statements was higher. The Collectives investment, in particular the Marlborough Balanced investment, formed the biggest part of Mr A’s SIPP. And the statement issued on 24 January 2020 showed that the Marlborough Balanced investment grew by 7.07%. The statement issued on 19 June 2021 showed that the Marlborough Balanced investment grew by 21.03%. • This would more than have offset what was lost in the years prior to this. Previous statements except that in 2018 showed that there was an improvement to the total current market value from the previous quarter end total market value. • As such, the investigator wasn’t persuaded that the statements alone were enough to say Mr A’s complaint was brought too late. • In terms of the merits of the complaint, the email from PSA in November 2017 said that PSA had considered the underlying investment, but the report said that the investment hadn’t formed part of the PSA’s considerations. • With regard to the other decision issued by an ombudsman, the investigator said that this service considered cases on an individual basis. The circumstances outlined in the decision quoted by PSA’s representative were different to Mr A’s. PSA’s representative then submitted further comments as follows:

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• Given that the investigator had said that Mr A would not have been expected to analyse every investment in the SIPP statement, it was unclear as to how singling out the Marlborough investment and referencing its proportion of the SIPP and a partial recovery in 2020 helped that point. But this in any case post-dated the relevant dates for knowledge for the purposes of DISP 2.8.2(2)(b). The 2021 statement was after the relevant limitation date, so wasn’t relevant. • Mr A very clearly understood that he needed 4.44% year on year growth just to match his scheme defined benefits. The application of DISP 2.8.2.2(b) didn’t require Mr A to be undertaking a detailed line by line analysis of the SIPP statement. The test for knowledge – as regularly applied by this service, and defined very specifically by an ombudsman in relation to another matter only last month – was whether, from an objective viewpoint, there was any information from which a customer ought reasonably to have appreciated that there may be a potential issue with the advice that would justify looking into it. • Once that knowledge arose, it couldn’t be “put back in the bottle” because of later events. The information here was very clear and gave rise to knowledge under the above test. • Even leaving aside the issues of matching the critical yield and risk categorisation, Mr A was told in November 2017 that PSA was reviewing the entirety of its back book of advice, that the FCA had concerns about such defined benefit pension transfers being in the best interests of people in Mr A’s position and PSA even actually suggested that Mr A take independent advice on this. • Such a communication should therefore objectively have given Mr A cause to look at revisiting the advice. That PSA said that it still considered the advice to be suitable wouldn’t change this nor negate the suggestion that the customer might nevertheless consider looking at the advice in light of what the FCA was saying and what even PSA was suggesting. This should constitute knowledge for the purposes of DISP 2.8.2(2)(b) – with the principle applied by the ombudsman in the other case referenced applying equally here. • It was insufficient to simply say that each case is decided on its facts. If an ombudsman finds that a customer being advised by PSA of a wholesale review of advice within a short period of the initial advice gave rise objectively to knowledge for the purposes of DISP 2.8.2(2)(b), then that was clearly relevant to this case where Mr A had been advised of the same thing. It was an objective test, unaffected by the characteristics of Mr A or the customer in the other case. • Even if the November 2017 information referencing the FCA’s concerns about transfers not being the best outcome for scheme members and PSA reviewing its entire back book of advice wasn’t enough, Mr A then received a number of consecutive SIPP statements showing that his pension pot was nowhere near to performing as required for the transfer to have been in his best interests by at least matching the critical yield. • That information was clear in that it showed no returns whatsoever on the pension pot after more than two years. Contrary to the investigator’s assertion, the statements didn’t show a continuous increase and the basic, but clear, indicator of this was set out side by side at the beginning of the statement, in terms of showing how much had been paid into the SIPP and, right next to it on the same line, what the SIPP was currently worth.

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• No investment experience or understanding was required to see that, if the current value is less than even the amount paid in, the SIPP would have lost money and, from an objective viewpoint, that must raise questions and constitute knowledge for the purposes of DISP 2.8.2(2)(b). This was particularly the case when Mr A was already on notice of regulatory question marks around scheme members not benefiting from their transfers. As agreement wasn’t reached on the matter, it was referred to me for review. I issued a decision on this service’s jurisdiction to consider the matter on 16 June 2025, in which I set out my reasons as to why I considered that the complaint had been raised in time. The following is an extract from that decision. “I’ve considered all the available evidence to determine whether this is a matter which this service can consider. I’d firstly acknowledge what PSA has said about it being reasonable to take at face value what a representative has said in bringing a complaint on its client’s behalf. And I accept therefore that Mr A considered himself, at least at the time he brought the complaint, to have had a low attitude to risk. So I agree that a consideration of any awareness of complaint ought to take this statement into account. But I think much hinges here on the content of the emailed letter of 26 November 2017, and having considered it carefully, I think it fatally undermines the arguments put forward by PSA as to why Mr A either was aware, or ought reasonably aware, of having cause for complaint more than three years before he raised that complaint. To explain further, and to firstly address the matter of Mr A’s attitude to risk, in the November 2017 letter, it said the following: “… you confirmed that you are a low to medium risk investor, and the report to you clearly identified that a low to medium investor should not expect a regular annual return average of more than 4.5% even with 10 years or more to go before retirement.” I’ve then thought about what a reasonable person might in any case have discerned as the difference between PSA’s November 2017 assessment of “low to medium” and Mr A’s own assessment of himself in April 2024, as set out in the complaint, as being a “low” risk investor. And having done so, and on the basis of Mr A being an “ordinary” retail investor with no particular financial expertise or experience, I don’t think the difference between the two is so significant that, by virtue of receiving the November 2017 letter, Mr A would reasonably have had cause for complaint on that basis. I think the mention of “low” in the “low to medium” description might reasonably have been sufficient in Mr A’s mind to reassure him that there was no meaningful disparity between his own view of his attitude to risk and that described by PSA, such that it ought reasonably to have given him cause for concern on that basis. Had PSA’s description been simply “medium” in that letter, then I think my view on this might be different. But the inclusion of the word “low” does in my mind provide sufficient latitude for Mr A to have reasonably considered that this wasn’t necessarily an inaccurate description, such that it would satisfy the requirements of DISP 2.8.2(2)(b) for having awareness of cause for complaint. Turning then to the matter of what PSA has said must have been Mr A’s awareness that the

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pension funds weren’t achieving the required critical yield, again, the letter of November 2017 doesn’t assist that argument. I’ve noted the debate between the investigator and PSA as to whether Mr A ought reasonably to have been aware from statements that his pension funds weren’t achieving the required critical yield. But there’s an additional aspect here which I think in any case renders that argument somewhat moot. To explain, I’d draw attention to the following part of the November 2017 letter: “As your local financial adviser will no doubt have advised you, there are many other factors which need to be considered when deciding whether to transfer or not, even if the gap between the calculated critical yield and the expected returns on your investments is such that you are likely to receive a smaller pension than you would have from your original scheme. You indicated, in the Fact Find provided to us by [overseas firm] on 11/30/2016, that the following factors were of importance to you: • lncome Flexibility • Control of your fund and its investment strategy • Death Benefits • Taxation ln addition, you confirmed that you are a low to medium risk investor, and the report to you clearly identified that a low to medium investor should not expect a regular annual return average of more than 4.5% even with 10 years or more to go before retirement. ln light of your needs and objectives, we considered that the increased flexibility offered by the recommended Pension rendered the transfer suitable for you, despite the critical yield being greater than the expected return on your investments. We also considered that the investments into which your Pension was invested were suitable for your attitude to risk.” (my emphasis) And so PSA was in essence saying that, although the critical yield may not have been realistically achievable, there were nevertheless other factors which it felt still made the advice suitable. This would in my view have reassured Mr A that, despite the performance perhaps not reaching the required critical yield, the advice had in any case been suitable for him. PSA has itself acknowledged that it reiterated its view that the transfer was suitable even though Mr A may not achieve the critical yield. And so even if Mr A was aware that the pension funds were underperforming the critical yield, he’d been effectively reassured that, for other reasons, the transfer was still suitable. I’ve noted what PSA’s representative has said about the reference to the regulator’s concerns around such transfers, but I think its reiteration of its view on suitability, along with setting out the reasons for this beyond the pension fund’s ability (or inability) to meet the critical yield, would have served to dilute that message such that Mr A wouldn’t reasonably have had awareness of cause for complaint for the purposes of satisfying the requirements of DISP 2.8.2(2)(b). I also acknowledge what PSA has said about the separate case against it which it deems to

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be sufficiently similar to this one for the same outcome to apply. But it is quite different. The letter sent in that case contained no reiteration of PSA’s view on the suitability of the advice. In fact, on the contrary, it set out that it had come to light that the portfolio of investments in which the client had invested was different from those upon which the critical yield had been based, which had resulted in an elevation in the critical yield required to match the scheme benefits. As such, PSA had calculated a higher critical yield and it believed this to be a significant change about which the client should be aware. And so, for the reasons given, my view is that Mr A didn’t have cause for complaint before the date which PSA has described as the limitation date here (i.e. three years before he actually raised his complaint though this representative). On the basis of the available evidence, I’m satisfied that Mr A didn’t have cause for complaint until he spoke to the third parties which alerted to him to there being a potential problem – and this was within three years of the complaint being raised. As such, my decision is that Mr A’s complaint has been raised in time.” In response, PSA commented as follows on the matter of jurisdiction: • The November 2017 letter identified the basis upon which it was considered in 2016 that the pension transfer had been suitable, despite the critical yield being higher than the expected returns. However, it didn’t say that this remained the case with regards to the achievability of the critical yield. It noted the very slight change in the critical yield from 4.45% to 4.44% and said that “we believe that this critical yield of 4.44% is achievable, and is consistent with the likely rates of growth that we indicated in our original report”. • The November 2017 letter therefore reiterated the required critical yield and suggested that it could be achieved. It also referred to the original report and reasons why, even in circumstances the performance perhaps not reaching the required critical yield the transfer was still suitable (although it should be noted that PSA didn’t actually advise Mr A to transfer). • It was accepted that the November 2017 letter provided a degree of reassurance to the effect that, even if the critical yield might not quite be achieved, that would not necessarily render the transfer unsuitable. However, that clearly couldn’t simply negate any question of Mr A having knowledge of a potential issue with the transfer at any point up to the limitation date of 7 May 2021 (three and a half years later). • Knowledge for the purposes of DISP2.8.2(2)(b) can arise from an accumulation of events/factors. It didn’t need to be produced from one single event. However, once knowledge arises, the clock starts to run and continues to do so. • It was necessary therefore to consider the position through to the limitation date, what information (both positive and negative) was available and at what point that accumulation of information would have comprised knowledge for the purposes of DISP 2.8.2(2)(b). • It was well-established that knowledge for the purposes of limitation can arise at the point of advice, if an error is evident. In this case, on the complaint now made, Mr A was miscategorised as a medium-risk investor. My decision on jurisdiction suggested that this wording may have been decisive for the purposes of knowledge if used in the November 2017 letter, in which case it should equally be decisive in the context

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of PSA’s 2016 advice and comprise knowledge for the purposes of DISP 2.8.2(2)(b). • But even if that wasn’t the case, the issue must be considered a “red flag” contributing to knowledge of potential issues around the initial advice. Thereafter, Mr A received the November 2017 letter from PSA. Even if it was considered that this letter didn’t constitute knowledge, because it provided reassurance, any such reassurance was clearly not categoric. The fact of the letter flagging up regulatory concerns, the revisiting of all of PSA’s files and including a suggestion that Mr A take independent advice were, at the least, further significant red flags around the advice and must contribute to the overall picture. • In any event, the November 2017 wasn’t the end of the matter. At that point, applying my findings as set out in the jurisdiction decision, Mr A was on notice of the various red flags above, but was reassured that the critical yield was likely achievable, but, if the returns did not quite match the yield, that might be justified by other factors such as flexibility of accessing benefits. • However, the position clearly worsened after November 2017. Mr A received a SIPP statement in October 2018 which showed that, for the period following the November 2017 letter, it wasn’t just the case that he hadn’t quite made the critical yield - he had actually lost money (including 5% of his portfolio in just one quarter). He then received statements for the next two quarters showing a further loss and a position with the SIPP after well over two years (May 2019) of it not even having broken even. This was a world away from potentially not achieving the 4.44% critical yield year on year and absolutely not something a low risk investor would reasonably expect. • In the circumstances, looking at the chronology of this matter in the round, from an objective viewpoint, there must have been a sufficient accumulation of red flags by May 2019 to put Mr A on notice of a potential issue with the transfer that would at least justifying looking into the matter further (as per the legal test of knowledge applied by FOS). In these circumstances, a letter from PSA 18 months previously which provided some reassurance (including that the 4.44% critical yield was achievable), but also flagged up a number of question marks and even went so far as to suggest that Mr A seek an independent review, couldn’t outweigh these red flags, nor could it negate the extent of the issues which then arose. With regard to the merits of the case, PSA said the following: • In light of the fact that this transfer wasn’t a UK transfer and shouldn’t be approached as such in determining the complaint, the following should be noted: o That PSA couldn’t from a regulatory perspective advise Mr A on whether or not to transfer, and did not do so; o No personal recommendation was provided and therefore COBS 9 (as relied upon by the investigator) didn’t apply; o PSA provided sufficient information for Mr A to reach an informed view as to what his benefits might look like if he transferred compared to staying in the scheme. • It was also evident that, on the balance of probabilities, Mr A would have transferred out of the scheme, notwithstanding any input from PSA, given his desire, in conjunction with his legal advisers, the overseas advising firm, to set up a SIPP and

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invest upon its advice, with a view no doubt to exceeding the relatively low critical yield but also being able to take benefits flexibly and in a tax efficient manner (given his overseas residency). • These factors also meant that PSA remained of the view that the transfer was suitable for Mr A, in particular when taking into account the tax regime. • Had Mr A remained in the scheme, he could have taken tax-free cash and then been required to take a small income from the scheme each year (which would also not have been subject to tax as he was resident overseas). The very significant benefit of the SIPP – which would not have been a benefit available to a UK-based individual – was that Mr A could withdraw whatever sum he wished from the SIPP (even 100%) and suffer no tax at all. • That significant flexibility made using a SIPP from an overseas location extremely attractive in comparison to having the funds tied up with the scheme and being very restricted as to how they could be accessed, by way only of a small income. It was undoubtedly these factors that not only made the transfer suitable but meant that Mr A would have transferred irrespective of whatever additional information or advice might have been provided by PSA. What I’ve decided – and why Jurisdiction I note the acceptance of PSA’s representative that the November 2017 letter provided reassurance to Mr A that, even if the critical yield wasn’t achievable, this wouldn’t render the transfer unsuitable. It made the further point, however, that it was an accumulation of knowledge which mattered, rather than knowledge form one single event. It further said that according to the complaint, Mr A had been miscategorised as a medium risk investor, and that I had indicated that, if this wording had been used in the November 2017 letter, I may have reached a different view on jurisdiction. It asserted that Mr A’s knowledge of this categorisation at the point of advice should similarly have alerted him to there being cause for complaint. But my response to this would be that, as the most recent communication offering reassurance to Mr A that the advice given to him had been suitable, and informing him that he had confirmed himself to be a “low to medium” risk investor, and that the report had clearly identified that such an investor shouldn’t expect regular annual returns of more than 4.5%, I can’t see why, on the basis of the reassurance provided in the letter, Mr A would then have had reason to revisit the 2016 report to compare the terms used in the risk categorisation. Nor, given the use of both the words “low” and “medium”, would this necessarily have set alarm bells ringing in terms of Mr A’s recollection of what might have been contained in the 2016 report. As far as Mr A was concerned, PSA was confirming what had been set out in the suitability report, and this, along with the reiteration of suitability, would in my view quite reasonably have sufficed in terms of the intended reassurance. The representative has again raised the matter of the regulatory concerns and the revisiting of all of PSA’s files, along with the suggestion of him seeking independent financial advice. But I have already addressed this in the jurisdiction decision. It’s further said that the position with regard to performance clearly worsened after November 2017, and instead of achieving the 4.44% pa critical yield, the pension fund was

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decreasing. This, it added, was starkly different from simply not achieving the critical yield and not something which a low risk investor would reasonably expect. But again, matters of performance have been addressed in the jurisdiction decision. The November 2017 letter said that, even though the critical yield may not be matched, there were other reasons as to why the transfer was nevertheless suitable for Mr A. Further, Mr A hasn’t declared himself to have been a “no risk” investor, and although there may have been periods of downturns in his pension funds, I don’t think this would necessarily have given him cause for complaint, especially given his long term investment horizon. Low risk investors aren’t immune from periodic declines in pension values. And I think Mr A would reasonably have been aware of this. Overall, therefore, my view remains the same as that in the decision on jurisdiction, in that the complaint has been raised in time. Merits I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. And having done so, I’ve reached similar overall conclusions to the investigator, and for broadly the same reasons. I’ve firstly considered the argument made by PSA’s representative that PSA couldn’t and didn’t advise Mr A on whether or not to transfer. It’s further said that no personal recommendation was made and therefore that COBS 9 didn’t apply. It’s added that PSA simply provided sufficient information for Mr A to be able to reach an informed view as to what his benefits might look like if he transferred, compared to retaining them in the scheme. And further, it’s asserted that this wasn’t a UK transfer. In response, I’d say the following. This clearly was a UK transfer – from a UK registered OPS. And the provision of advice on transferring benefits from an OPS is a regulated financial activity. Mr A's benefits were part of such a scheme, connected to a previous period of employment before he moved overseas. And at the time in question, PSA was authorised by the FCA to provide this type of advice. Since April 2015, under section 48 of the Pension Schemes Act 2015 and accompanying regulations, trustees of defined benefit schemes with transfer values exceeding £30,000 have needed to confirm that the scheme member has received independent financial advice before approving a transfer. This requirement applies whether or not the advice supports the transfer. Trustees must receive written confirmation that such advice was provided. PSA acknowledged these requirements in the report prepared for Mr A in December 2016 and would, or at least should, have understood both the obligations and the rationale behind them. Regulation 7 of the 2015 Transitional Provisions and Appropriate Independent Advice Regulations (Statutory Instrument 2015/742) outlines the specific content required in this confirmation. It must be a written statement from a properly authorised adviser that confirms: • Advice has been provided which is specific to the type of transaction proposed by the member, the transfer of safeguarded benefits to flexible benefits, • That the adviser has permission to carry out the regulated activity in article 53E of the FCA's regulated activities order to provide advice on the transfer of safeguarded benefits,

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• The name of the member that was given the advice and the scheme in which they hold safeguarded benefits to which the advice given applies, and • The adviser's FCA Firm Reference number where the adviser works for the purposes of regulation to carry out the regulated activity. I think it’s also worth noting the following from the PERG section of the FCA’s handbook: PERG 8.28.1G (1/04/2013) In the FCA's view, advice requires an element of opinion on the part of the adviser. In effect, it is a recommendation as to a course of action. Information, on the other hand, involves statements of fact or figures. And PERG 8.28.2G (1/07/2005) In general terms, simply giving information without making any comment or value judgement on its relevance to decisions which an investor may make is not advice. PSA provided the required declaration, thereby acknowledging that it had a professional advisory relationship with Mr A and had undertaken the regulated activity involved in the pension transfer. It confirmed that it had provided advice. In doing so, it effectively represented itself — under regulatory standards —as having advised Mr A, making him its client. This meant it used its regulatory permissions to deliver the advice – the opinion or recommendation - and, in turn, accepted the associated obligations. PSA therefore either understood, or reasonably ought to have understood, that by issuing the Appropriate Advice Declaration, it was presenting itself as the party that had advised Mr A – and so had provided an opinion or recommendation on the merits of the transfer. This would, or at least should, have been clear not just to PSA, but, by signing the declaration, also to other parties such as the OPS trustees. The claim that PSA was able to provide advice, but that this would take the form of only information for Mr A to be able to make an informed decision doesn’t stand even superficial scrutiny. This was neither the FCA’s definition of advice, nor a reasonable or credible understanding of what regulated advice would mean in the context of defined benefits transfers. Within the declaration, PSA specifically said that it had provided advice to Mr A, and based on the legal framework, regulatory requirements, and industry guidance available at the time, there’s no credible basis for believing an FCA-regulated firm could issue an Appropriate Advice Declaration without having actually provided the advice – and so, in accordance with PERG 8.28.1, an opinion or recommendation. PSA’s representative has said that the FCA reviewed its “model” in 2017 and didn’t find that it was unsuitable at the time, although it suggested changes to the model going forward. However, the fact that PSA wrote to Mr A in November 2017 (presumably in cooperation with the FCA) citing regulatory concerns around pension transfers (and to note that this wasn’t an industry wide process) and reiterating a suitability consideration which had been notably absent from the report issued in December 2016, strongly suggests to me that this isn’t an entirely accurate description of the regulator’s view of its model when it provided advice to Mr A. But even if a different interpretation of that particular aspect were possible, my role and that of the regulator is different. I’m required to determine what PSA should have done in

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December 2016 based on the relevant laws, rules, regulations and guidance in place at the time. And I’m satisfied that this decision fulfils that requirement. Put simply, if it’s PSA’s position that it didn’t advise Mr A in the sense of providing a recommendation or opinion, its submission of the declaration would suggest that it made a misleading or inaccurate statement to the OPS trustees, using its regulatory status to facilitate the pension transfer. This would represent a significant regulatory failure. Alternatively, if it confirmed—formally and for regulatory purposes—that it had given advice, but didn’t intend that statement to be taken at face value, such a stance would in my view be insupportable. In PSA's December 2016 report, it further said that it wouldn’t be providing investment advice, nor advice on the SIPP which should be established, and that decisions around selecting specific investments were outside the scope of its assessment. The report makes no mention of the SIPP Mr A would be using or the plans for reinvestment. Instead, it referred to other parties being responsible for providing that advice. However, this limitation didn’t remove PSA's responsibility to meet the regulator’s expectations, as clearly set out in the FCA’s 2013, 2014 and 2017 alerts, as referenced above by the investigator. Assertions that the documentation - particularly the Appropriate Advice Declaration - only confirmed that Mr A received advice (but didn’t contain a recommendation), in my view, lack credibility and aren’t supported by the requirements of giving advice. The wording used in the declaration is clear, and as set out above, PSA should have understood this. And the documents clearly show that PSA was identifying itself as the advising firm which gave transfer advice to Mr A regarding his OPS benefits. PSA has further said that it was actually the overseas financial firm which gave the advice to Mr A. However, PSA clearly accepted a regulated advisory role at the time and cannot now credibly argue that it wasn’t presenting itself as Mr A’s adviser. By signing documentation that stated it had given regulated advice, PSA made Mr A its client. And the OPS trustees had every reason to rely on that confirmation. And for clarity, whilst PS15-12 acknowledged the challenges which may be exist within the advice process for advice to an overseas resident, it didn’t make provision for advice, as required by section 48 of the Pension Schemes Act 2015, to simply constitute the provision of information in such circumstances. Without PSA's written confirmation that it had advised Mr A, the pension transfer couldn’t have proceeded. Its involvement was essential and PSA’s role was to complete the regulatory paperwork necessary to enable the transfer—and in doing so, it became the FCA- authorised adviser named in the process. Further, even if the advice (or the format of advice) PSA gave was inadequate or in some way flawed, it still constituted regulated advice. The quality of advice (which I’ll address further below) isn’t what determines whether the transfer may go ahead - it’s the confirmation by a regulated adviser that advice has been given. And that confirmation is a core required safeguard. Similarly, I don’t accept that the assertion of simply providing information would have accurately reflected what Mr A would consider he’d been told, or what he could reasonably have understood from PSA. While PSA has characterised its report as being simply the provision of information, if it’s PSA’s position that it didn’t provide a misleading or inaccurate

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statement to the OPS trustees, which I’m assuming would be the case here, then it must have provided advice – defined above as an opinion or recommendation – to Mr A. It's therefore then worth noting the following within PERG: PERG 8.30.2G (1/07/2005) Advice can be provided in many ways including: (1) face to face; (2) orally to a group; (3) by telephone; (4) by correspondence (including e-mail); (5) in a publication, broadcast or website; and (6) through the provision of an interactive software system. As such, even if an opinion or recommendation wasn’t expressed in the report it issued to Mr A, it’s quite possible that Mr A was provided this verbally. And on the basis of my assumption above that it would be PSA’s position that it didn’t provide a misleading or inaccurate statement to the OPS trustees, I therefore think it’s a reasonable conclusion that this would have been the case here. And I think this position of a recommendation having been given outside of the content of the report is lent credence by the later comments made by PSA, not least when reiterating the suitability of the transfer in the November 2017 letter. Had PSA expressed no opinion on the suitability of the transfer in 2016, it would seem somewhat odd and illogical for it to have been reiterating suitability less than one year later. As a reminder of the wording PSA used in that letter, it said the following: “ln light of your needs and objectives, we considered that the increased flexibility offered by the recommended Pension rendered the transfer suitable for you, despite the critical yield being greater than the expected return on your investments. We also considered that the investments into which your Pension was invested were suitable for your attitude to risk.” I’m satisfied therefore, that, on the basis of PSA’s own update in 2017, an opinion on suitability must have been expressed to Mr A in 2016, even if not contained in the report PSA issued in December 2016. But that suitability assessment was flawed. As set out above, whilst evaluating the critical yield for financial viability (which in itself used assumptions for a SIPP and the investments), it didn’t meet other requirements, which I’ll explore further below. The applicable guidance, rules, regulations and requirements This isn’t a comprehensive list of the guidance, rules and regulations which applied in 2016, but provides useful context for my assessment of the business' actions here. Within the FCA’s handbook, COBS 2.1.1R required a regulated business to “act honestly, fairly and professionally in accordance with the best interests of its client”. There were also specific requirements and guidance relating to transfers from defined benefit schemes – these were contained in COBS 19.1.

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COBS 19.1.1R said the following: “(1) This section applies to a firm that gives advice or a personal recommendation about a pension transfer, a pension conversion or a pension opt-out.” (my emphasis) The clear effect of this is that, although PSA may consider that it didn’t give a personal recommendation, hence its position that COBS 9 didn’t apply, at the time of the transfer, COBS 19 applied to instances of both advice and personal recommendations. COBS 19.1.2R required the following: “A firm must: (1) compare the benefits likely (on reasonable assumptions) to be paid under a defined benefits pension scheme or other pension scheme with safeguarded benefits with the benefits afforded by a personal pension scheme, stakeholder pension scheme or other pension scheme with flexible benefits, before it advises a retail client to transfer out of a defined benefits scheme or other pension scheme with safeguarded benefits; (2) ensure that that comparison includes enough information for the client to be able to make an informed decision; (3) give the client a copy of the comparison, drawing the client’s attention to the factors that do and do not support the firm's advice, in good time, and in any case no later than when the key features document is provided; and (4) take reasonable steps to ensure that the client understands the firm’s comparison and its advice.” COBS 19.1.3G said the following: “In particular, the comparison should: (1) take into account all of the retail client's relevant circumstances; (2) have regard to the benefits and options available under the ceding scheme and the effect of replacing them with the benefits and options under the proposed scheme; (3) explain the assumptions on which it is based and the rates of return that would have to be achieved to replicate the benefits being given up; (4) be illustrated on rates of return which take into account the likely expected returns of the assets in which the retail client's funds will be invested;” Under the heading “Suitability”, COBS 19.1.6 set out the following: “When advising a retail client who is, or is eligible to be, a member of a defined benefits occupational pension scheme or other scheme with safeguarded benefits whether to transfer, convert or opt-out, a firm should start by assuming that a transfer, conversion or opt-out will not be suitable. A firm should only then consider a transfer, conversion or opt-out to be suitable if it can clearly demonstrate, on contemporary evidence, that the transfer, conversion or opt-out is in the client's best interests.” COBS 19.1.7 also said: “When a firm advises a retail client on a pension transfer, pension conversion or pension opt-out, it should consider the client’s attitude to risk including, where relevant, in relation to

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the rate of investment growth that would have to be achieved to replicate the benefits being given up.” And COBS 19.1.8 set out that: “When a firm prepares a suitability report it should include: (1) a summary of the advantages and disadvantages of its personal recommendation; (2) an analysis of the financial implications (if the recommendation is to opt-out); and (3) a summary of any other material information.” I’ve therefore considered the suitability of PSA’s advice to Mr A in the context of the above requirements and guidance. And as set out above, my findings largely mirror those of the investigator, with the exception of the exclusion of a consideration of COBS 9. But I’d comment further as follows. Fact finding, which would have enabled the firm to consider Mr A’s circumstances as set out in COBS 19.1.3, and which I understand was undertaken by a separate unregulated firm, occurred in this instance, and the TVAS was also undertaken, which produced the critical yield. But this really is the extent to which the relevant rules, regulations and guidance were adhered in this case. Other than recording Mr A’s age that the time, intended retirement age and scheme entitlement, other important circumstances, e.g. other assets, family situation and state of health weren’t mentioned in the report. Mr A’s objectives were noted as being flexibility of drawdown options, understanding and controlling his investments and passing on his pension fund to his family in the event of his death. But without reference to the above details, it’s difficult to conceive how suitability could be established in terms of these objectives. There was also no assumption, expressed either implicitly within the report or explicitly to Mr A, that the transfer would be unsuitable unless it could be clearly demonstrated that it was in his best interests, which was a failure to follow the guidance of COBS 19.1.6. Additionally, there was an abrogation of responsibility to describe and consider Mr A’s attitude to risk and so determine the suitability of the underlying investments which would be used for the proceeds of any transfer, which was a failure to follow the guidance issued in several FCA updates between 2013 and 2017, and also COBS 19.1.3. To address the matter of financial viability, I think it’s fair to say that the required critical yield was only just above the discount rate cited by the investigator for 14 years to retirement - 4.45% pa and 4.42% pa respectively. But as also set out by the investigator, it was impossible to determine whether that critical yield could realistically be achieved year on year for the required term as neither Mr A’s attitude to risk, nor the intended SIPP/investments to receive the transfer proceeds, were referenced or discussed in the report. And so no conclusions on financial viability could reasonably be drawn. But as noted by the investigator, there are other reasons beyond financial viability as to why a transfer may be suitable. And indeed, PSA noted this in the November 2017 letter. However, although flexibility in drawdown and control of investments were cited as objectives, I haven’t seen any persuasive corroborative evidence or reasons as to why Mr A

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would either want, or need, the flexibility of income and investment control which would be provided by the transferred funds in retirement, when compared against the guaranteed, risk free escalating income, with no requirement for investment management, which he would receive from the scheme. And no additional detail on why a requirement for flexibility or control existed was provided in the November 2016 update. In terms of the alternative lump sum death benefits a transfer offered to his family, the priority here was to advise Mr A about what was best for his retirement. And the existing scheme offered death benefits, by way of a spouse’s pension, which would have been valuable to his wife in the event of his death. Whilst the CETV figure would no doubt have appeared attractive as a potential lump sum, the sum remaining on death following a transfer was always likely to be different. As well as being dependent on investment performance, it would have also been reduced by any income Mr A drew in his lifetime. And there’s no detail as to why a lump sum would have been important to Mr A, for example shortened life expectancy which might mean a scheme income would likely represent poor value. Mr A was in fact recorded (albeit not in the report) as being in good health. Further, Mr A was 50 at the time of the advice, and so at least five years from the age at which individual can begin to access retirement benefits based in the UK, but perhaps more pertinently some 15 years from his envisaged retirement age. As noted in the report, there was some uncertainty about whether Mr A would remain overseas or return to the UK at some point in the future. And so no irrevocable decision needed to be made on Mr A’s scheme benefits at that time. I therefore think that it would have been suitable for the scheme benefits to have been retained until closer to Mr A’s retirement age, at which point he would have had more certainty around his likely country of residence and whether the guaranteed scheme benefits were important to him. Overall, therefore, for the reasons given, I’m not satisfied that it was clearly in Mr A’s best interest, as set out in COBS 19.1.6, to relinquish his defined benefits and transfer them in 2016. And my view is that PSA should have advised against it. PSA’s representative has further asserted that, even if PSA had advised against the transfer, Mr A would in any case have proceeded. And I acknowledge the point being made. PSA wasn’t the only firm involved here (albeit the only UK regulated firm). Ans so I have to take into account the kind of influence that his local advising firm would have had on him and his decision to transfer, along with any personally held inclination to transfer. But notwithstanding my comments above about there being no persuasive corroborative evidence (e.g. experience in managing his own investments or reasons for the importance of flexibility versus guaranteed income) for the stated objectives, as the UK regulated firm, I nevertheless think PSA had an important part to play in influencing Mr A. And I think that, had PSA set out a rationale in terms similar to the investigator’s and my own above as to why a transfer wasn’t at that time either necessary or in any case a clearly and demonstrably suitable course of action (as set out in COBS 19.1.6), this would have given Mr A significant pause for thought about transferring. And I think it would have been difficult for his local advising firm to argue against a deferment of any decision making until closer to Mr A’s retirement, on the basis of him not in any case being able to access his pension benefits yet, along with a situation which could well change quite significantly, both in terms of residency and his attitude to a guaranteed, escalating income.

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Therefore, my view is that, on balance, had PSA advised against the transfer at that point in time, Mr A would have retained his scheme benefits. It follows therefore, that for the reasons given, my view is that an objective assessment of this case leads to the fair and reasonable conclusion that the transfer upon which PSA advised wasn’t suitable for Mr A, nor was it in his best interests. And the complaint should be upheld. Putting things right As with the investigator, a fair and reasonable outcome would be for PSA to put Mr A, as far as possible, into the position he would now be in but for the unsuitable transfer. With suitable advice, I’m persuaded that Mr A would more likely than not have retained his defined benefits in the OPS. PSA should therefore undertake a redress calculation in line with the rules for calculating redress for non-compliant pension transfer advice, as detailed in Policy Statement PS22/13 and set out in the regulator’s handbook in DISP App 4. Mr A hasn’t retired yet, and my understanding is that he has no plan to do so at present. So, compensation should be based on the defined benefit scheme’s normal retirement age, as per the usual assumptions in the FCA guidance. The calculation should be carried out using the most recent financial assumptions in line with PS22/13 and DISP App 4. In accordance with the regulator’s expectations, the calculation should be undertaken or submitted to an appropriate provider promptly following receipt of notification of Mr A’ acceptance. If the redress calculation demonstrates a loss, as explained in PS22/13 and set out in DISP App 4, PSA should: • calculate and offer Mr A redress as a cash lump sum payment, • explain to Mr A before starting the redress calculation that: ▪ redress will be calculated on the basis that it will be invested prudently (in line with the cautious investment return assumption used in the calculation), and ▪ a straightforward way to invest the redress prudently is to use it to augment the current defined contribution pension • offer to calculate how much of any redress Mr A receives could be used to augment the pension rather than receiving it all as a cash lump sum, • if Mr A accepts PSA’s offer to calculate how much of the redress could be augmented, request the necessary information and not charge Mr A for the calculation, even if he ultimately decides not to have any of the redress augmented, and • take a prudent approach when calculating how much redress could be augmented, given the inherent uncertainty around Mr A’ end of year tax position. Redress paid directly to Mr A as a cash lump sum in respect of a future loss would include compensation in respect of benefits that would otherwise have provided a taxable income.

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So, in line with DISP App 4.3.31G(3), PSA may make a notional deduction to allow for income tax that would otherwise have been paid. Mr A’ likely income tax rate in retirement is presumed to be 20%. In line with DISP App 4.3.31G(1), this notional reduction may not be applied to any element of lost tax-free cash. As with the investigator, I consider that Mr A would have been distressed to learn that he’d been given unsuitable advice to transfer his defined benefits. The investigator recommended that PSA pay Mr A an additional £300 in respect of this. As set out on our website, this would fall within the category of where there have been repeated small errors, or a larger single mistake, requiring a reasonable amount of effort to sort out. And I think this is a reasonable characterisation of what’s happened here. As such, PSA should pay Mr A an additional £300. My final decision My final decision is that I uphold the complaint and direct Peter Stewart Associates Limited to undertake the above. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr A to accept or reject my decision before 3 October 2025. Philip Miller Ombudsman

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