Pensions Ombudsman highlights need for new measures to address member ‘advice gap’

The dispute involved Mr N who was due to retire during the Covid-19 pandemic. He was aware that the pandemic was having an impact on pension fund values, and he contacted his provider a number of times, between February and March 2020, seeking guidance on how he could manage this risk in relation to his own fund. His provider explained that he could switch investment funds and that full details of the funds available could be found online, where Mr N could also complete the relevant form to authorise a transfer between funds.

In March 2020, the pension provider emailed Mr N to explain the factors which influenced the performance of his chosen investment fund. During a subsequent telephone call, the call handler told Mr N that he could switch into a ‘cash’ fund – a low-risk fund that would fluctuate in value less.

On 11 March 2020, Mr N contacted his provider to further express concern over the performance of his fund and was later advised to consider speaking to a financial advisor. On 20 March 2020, Mr N was told that his options were either to switch the fund he was invested in or wait for his employer to begin the disinvestment process.

About three and a half weeks after this initial contact with the provider, Mr N took the decision to move his investments into the cash fund. Over this period, his fund value had fallen from £66,151.52 to £59,800, recovering to £60,813.95 by the time the switch into cash was actioned.

Mr N’s complaint was that he only received “bland replies and no specific guidance” from the provider. He would have liked the cash option to have been explained fully at the outset, believing this would have led him to authorise a transfer before the fund lost the additional value. His provider suggested that he seek financial advice but that was not an option for him in the circumstances that existed at the time.

On 19 May 2020, the provider responded explaining that Mr N was informed he could switch funds and that his annual statement explained that it was his responsibility to decide which funds to invest in. The provider acknowledged a delay in processing the fund switch, offering to pay £150 in compensation.

Mr N made a further complaint arguing that the provider failed to mention the minimal risk (cash) fund to him, which resulted in the amount of his fund being more than £5,000 lower than when he first contacted the provider.

The pension provider acknowledged that it had failed to tell Mr N that he could switch to another fund of his choice to potentially minimise the loss in value. It reiterated that it was unable to advise into which funds it would be most suitable for Mr N to switch, however they had confirmed a fund switch was an option available. Mr N was offered a further payment of £150 due to poor service received and the conflicting information.

The PO confirmed that the provider was not at fault. It was not permitted to give Mr N financial advice and could only provide information, which it signposted correctly.  It could not help Mr N decide what the best option would be for him in relation to his investments. The provider was not responsible for the fact that Mr N did not carry out the switch to a cash fund at an earlier date.