St James’s Place Wealth Management has been ordered to compensate a client for pension mortgage advice given in 1994 after initially complaining he was wrongly charged for life cover included in the pension plan.
The complainant, Mr D, was advised to start a pension plan and link this to a mortgage repayment. He complained about the life cover because he thought it was free and said SJP never told him about the costs.
Mr D stopped paying into the plan from August 2014 and said that, over the 20 years of the plan, he had never been told about the costs of the life cover.
According to the FOS decision, SJP said they could not be sure the advice was right for Mr D.
They worked out his losses on the basis that the client should have been advised to start a repayment mortgage instead of a pension mortgage and said that if the plan was re-worked to show no life cover then the transfer value would be higher, which would affect the compensation offer.
The complaint was referred to the FOS and the adjudicator ordered SJP to pay redress to the client, however Mr D did not accept the adjudicator’s findings.
He said SJP had changed the nature of his complaint and had failed to ensure the pension plan’s fund would deliver the mortgage amount of £52,500, which was a condition of the contract.
He also wanted an offer to be worked out that would result in a payment to him of £92,400.
The complaint was then referred to ombudsman Roy Milne who agreed with the adjudicator.
He said: “There are some issues about whether the advice was suitable for Mr D. He’s complained about the cost of life cover and the performance of the pension fund. In my view, that indicates that he didn’t understand how the pension was intended to repay his mortgage. So, I think it’s right that he’s compensated for that advice.”
Milne added: “If Mr D hadn’t been advised to use a pension to repay his mortgage I think it’s reasonable to assume that he would have had a repayment mortgage. The comparison to be made has to look at the difference in the capital that would have been repaid and the difference in costs. St James’s Place has agreed to ignore the savings Mr D made. Those savings were for more than the cost of the life cover Mr D had paid.”
Milne said his aim was to put Mr D in the position he would be in had he had a repayment mortgage.