Pension Ombudsman highlights importance of clear fee information

In the case (11 pages / 58 KB), Mr R complained that his self-invested personal pension (SIPP) provider did not make him aware of its high fees for administering his account. In particular, he claimed that the documents he received before setting up the account did not state how much the fees would be, and other fee documents received later lacked transparency.

Mr R’s original pension provider had gone into liquidation, so he had the option of transferring to a new SIPP provider. In 2018, the new provider prepared a pension fund illustration to show the annual gross pension income that may be payable upon Mr R’s retirement. This document confirmed the annual product fee and the annual fee for holding unquoted shares, as well as showing how these fees could impact the value of Mr R’s fund each year until he reached the age of 75.

Mr R completed the transfer application form, stating within this that he had received financial advice confirming that the SIPP was suitable for him.

The provider published an updated document containing a breakdown of fees in 2018 and then again in 2021, sending Mr R invoices on both occasions.

In 2021, Mr R complained that the provider’s fees were much higher than his previous SIPP and were higher than other competitive products. He said he had not been told how much the fees were at the outset. The provider argued that its fees were displayed alongside its terms and conditions and were sent to Mr R in 2018 during the pension transfer process, with these documents also highlighting that Mr R’s fund, a unit trust holding, was not a standard investment.

However, Mr R complained that it had not been made clear that one of his assets was both “bespoke” and “non-standard”, and would therefore attract additional fees.

The PO did not uphold Mr R’s complaint as the provider’s fee documentation clearly set out the fees payable, as well as the additional fees charged for bespoke or non-standard investments.

Mr R argued that it was reasonable to assume the new pension provider’s fees would be similar to those charged before the transfer. However, none of the letters from the new provider inferred this and the first fee invoice was almost the same as the amount quoted in the provider’s transfer documents, sent and reviewed by Mr R.

Additionally, the PO requires those bringing complaints to take steps to mitigate their own financial losses. Mr R was not considered by the PO to have done this as he did not request a copy of the fee documentation to investigate the fees that he was being charged when he became concerned.

The PO also decided that Mr R had known his SIPP held a non-standard asset, and therefore would result in additional fees, as he had ticked the relevant box when filling in his transfer application form.

During the PO investigation, the provider was unable to hand over any evidence that it had sent fee information before Mr R was given the option to transfer his SIPP. It was therefore held reasonable to assume that the necessary documentation had not been sent. However, the deputy PO decided that this was simply maladministration but did not lead to financial loss. Whilst the situation may have caused Mr R distress and inconvenience, this did not meet the minimum threshold to merit an award. Although the fee documentation should have been sent to Mr R at that time, this did not change the fact that he agreed to pay the fees when he signed the provider’s application form.

The outcome of this case highlights that it is not the role of the PO to decide whether fees charged were reasonable or fair. Mr R believed that the provider’s fees were too high for his particular circumstances, but this was a business decision for the provider, and customers could decide whether to use its services, rather than requiring PO intervention.