Quilter Financial Services Limited · DRN-6014738

The complaint Ms V complains that an appointed representative of what is now Quilter Financial Services Limited wrongly advised her to transfer from her former employer’s defined benefit (DB) pension scheme in order to draw down tax-free cash from a self-invested personal pension (SIPP). What happened Ms V was referred by her usual Quilter adviser to another who was qualified to advise on DB pensions. They met in May 2018 and the adviser subsequently recommended that Ms V transfer her pension in a letter dated 8 June 2018. Her circumstances were as follows: - Aged 64 and divorced. Her will left her estate to her children, neither of whom were financially dependent on her. (I understand she has a son and a daughter) - Hoped to work until at least age 70, providing she continued to be in good health (following a heart attack in 2015 which had been successfully treated with stents) - Owned her own home worth £370,000 mortgage-free - Employed in part-time roles for three different organisations - One of these provided a defined contribution (DC) pension with a fund value of around £12,000 - Expected to receive a state pension of around £8,000pa from January 2020 - Owned a £300,000 buy-to-let property providing £1,100 gross monthly income - Total net monthly income of £2,100 and expenditure of £1,271 - £77,500 repayment mortgage outstanding on the buy-to-let at a variable interest rate of 2.25%, costing £583.10 a month. She was overpaying to reduce the mortgage before its redemption in January 2031 - £132,000 in savings and investments: including two bonds valued at £88,000 (which Quilter had set up for her in 2014 using the proceeds of her divorce settlement), an Old Mutual Stocks and Shares ISA valued at £34,000 and cash deposits of £10,000 - Balanced attitude to risk with some understanding of how markets worked Quilter’s letter noted that Ms V was aware a number of her colleagues in the same DB scheme had discussed transferring their pension, and that was in part why she was looking for advice. The details of her DB scheme were as follows: - About 21.5 years’ service to August 2001 - She was now beyond the normal retirement age of 60 (May 2014) - Deferred pension at date of leaving of £6,152pa, including £1,966 Guaranteed Minimum Pension (GMP) - GMP attracted 6.25% fixed rate revaluation, and the remainder at the Consumer Prices Index (CPI) limited to 5% - Pension had been revalued to £13,307pa, or alternatively £66,139 of tax-free cash was available leaving a residual pension of £9,920pa - Pension increases in payment at CPI up to 3% for the post-1988 GMP, and CPI up to 5% for the excess above the GMP - Transfer value of £377,200 - No concern regarding the funding of the scheme

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- Figures included Additional Voluntary Contribution (AVC) fund of £4,744 The adviser recommended that Ms V transfer to an Aegon drawdown arrangement to access more tax-free cash because she wanted to repay her buy-to-let mortgage, build a conservatory extension and also gift the remainder (with her ISA) to her daughter to buy her own house. £94,302 tax-free cash was subsequently received in June 2018. He explained the transfer would allow Ms V to take control of her retirement planning and have more flexibility than the DB scheme offered. Another reason for transferring was that the drawdown death benefits would be much more favourable for Ms V’s children (or any other chosen beneficiary). Repaying the buy-to- let mortgage would allow her to free up income and have more money to build her savings back up. As her two investment bonds were guaranteed and had maturity dates in the future, she didn’t want to access those at that time. Although the adviser had questioned the need to repay the mortgage given it was affordable, Ms V preferred the peace of mind, knowing all her debts were paid off in the event she gave up work early - or her health deteriorated again, which she remained concerned about. The adviser recommended that she invest almost all the remaining fund (£275,657 after the initial advice fee) into the Cirilium Balanced fund. This was a multi-asset, multi manager fund, which he said was in line with her balanced risk profile. (Her Old Mutual Stocks and Shares ISA was already invested in that fund.) As she didn’t need to take a taxable income or make irreversible commitments, an annuity wasn’t recommended. A fixed fee of £7,250 was payable for the advice, and Quilter put in place an annual review process for an additional 0.75% of the fund value (£2,094 initially). In July 2021 Ms V transferred £308,215 away from the Aegon SIPP to True Potential, after her Quilter adviser moved to that firm. A Claims Management Company (CMC) complained to Quilter on Ms V’s behalf in September 2024 about two things: - She’d been given the wrong advice to transfer her pension - Not all of the annual reviews had been carried out for which she had paid fees Quilter responded that reviews only stopped when Ms V disengaged as a client, so no refund was due for any that were missed. As a result Ms V’s CMC is no longer pursuing that complaint point. Quilter also argued that the advice complaint hadn’t been raised within six years of the transfer or (if later) three years from when Ms V knew, or ought reasonably to have known, that she had cause to complain. Quilter has recently told this service it isn’t pursuing that point further, which I’ve taken to mean it consents to our service looking at the complaint. However, it has defended its advice as being suitable for Ms V throughout our investigation. Our investigation On the merits of the complaint, our Investigator noted Quillter had challenged Ms V on why she needed to pay off a mortgage that was affordable, and the adviser heard that this was for Ms V’s peace of mind. Yet she didn’t actually take that course of action. It disappeared from being a priority of hers at the subsequent reviews and was no longer challenged by the adviser.

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Similarly, from what he could tell from the fact finds at subsequent annual reviews, Ms V didn’t use any funds (or her ISA) to make the proposed gift to her daughter. The timing or amount of the gift, and whether similar gifts were anticipated to Ms V’s other children, hadn’t been clarified to any extent by the adviser at the time of the transfer – and the apparent fact she hadn’t made any gifts wasn’t questioned further after the original advice. All of these suggested to the Investigator that accessing tax-free cash from the DB scheme wasn’t a paramount objective. But if it had been, he also noted that Ms V was beyond the DB scheme’s normal retirement age and could have taken benefits directly from the scheme, reinvesting any DB income she didn’t require tax-efficiently. If necessary funds could have been released in due course from her investment bonds and ISAs to assist with this, as in his view the adviser had just accepted (without question) Ms V’s reluctance to do that. Our Investigator thought that maintaining the security of Ms V’s future income, which in combination with the state pension would have met all her living costs, should have been more important than the admitted improvement in death benefits brought about by the transfer in Ms V’s situation. He additionally noted that Ms V’s other sources of income wouldn’t be guaranteed in this way. So, he proposed that Ms V was paid redress calculated by assuming that she had accessed her DB pension instead of making the transfer. Ms V’s CMC accepted the Investigator’s view on her behalf, but Quilter did not. In summary, it said: • Because the financial adviser is regulated and has to hold extensive qualifications, “I am unsure how the advice of a complex DB pension transfer can be called unsuitable”. • The Investigator had reached an opinion of what he believed to have been a better piece of advice, rather than demonstrating Quilter’s advice was actually unsuitable. • This employed hindsight, because Ms V’s failure to pay off her mortgage one year on wouldn’t have been known to the adviser when recommending the transfer. Something may have come up between those two meetings which took priority over the mortgage loan being paid off. • It wasn’t relevant for the adviser to bring up the fact that the mortgage hadn’t been repaid at a later review, as his earlier advice couldn’t be retracted. • Removing the guaranteed income of the DB pension only meant that other guarantees in Ms V’s state pension and her current employer’s pension (which could be guaranteed by buying an annuity) would replace it. • The outcome proposed by the Investigator would have caused Ms V to receive DB pension income that would have been taxed whilst she was still working. • If (as the Investigator had said) accessing lump sum wasn’t Ms V’s priority and the timescale of any gifts to children was unclear, as she could afford overpayments it would be more logical to say she should have continued to defer the DB pension. • Repaying the mortgage also gave Ms V a similar level of security to having the guaranteed DB income (i.e. she didn’t necessarily need both). • Taking the DB income and putting it in savings and investments would have the same effect as leaving it in her pension and drawing down when needed. The latter would also have allowed her to stagger smaller tax-free cash gifts to her children at different times. I note that at one point in Quilter’s responses it said that nothing has been provided to show the repayment of the mortgage wasn’t Ms V’s main priority when the advice was given. It said the best evidence was that Ms V was already making overpayments, suggesting paying off the mortgage was a priority.

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However, Quilter later went on to highlight that paying off the mortgage was described as “future aspirations and objectives”. So it wasn’t a key objective, and the advice wasn’t given with the sole purpose of achieving it. Rather, future flexibility with income and death benefits was the objective, with the funds not being required for a gift or home improvements at a specific date. As our Investigator wasn’t persuaded to change his opinion, the case has been referred to me for a decision. I asked the Investigator to clarify with Ms V what she had used the tax- free cash for and she confirmed that she did use the whole of the tax-free cash sum to help her daughter buy a flat. So, it now appears this simply wasn’t noted on the subsequent fact find. Ms V didn't use this sum to pay off her buy to let mortgage. However she subsequently sold the buy to let property and used the proceeds to repay the mortgage. We’ve updated Quilter with this information and it says this shows Ms V wanted the transfer to facilitate several different objectives, from which she then prioritised helping her daughter to buy a home. As a result it still considers its advice was suitable in her circumstances. In its view she couldn’t have achieved her objectives by remaining in the DB scheme as it would have depleted her emergency funds and put the maintenance of the rental property and her own home at risk. What I’ve decided – and why I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. I’ve taken into account relevant law and regulations, regulator’s rules, guidance and standards and codes of practice, and what I consider to have been good industry practice at the time. This includes the Principles for Businesses (‘PRIN’) and the Conduct of Business Sourcebook (‘COBS’). And where the evidence is incomplete, inconclusive or contradictory, I reach my conclusions on the balance of probabilities – that is, what I think is more likely than not to have happened based on the available evidence and the wider surrounding circumstances. The below is not a comprehensive list of the rules and regulations which applied at the time of the advice, but provides useful context for my assessment of Quilter's actions here. PRIN 6: A firm must pay due regard to the interests of its customers and treat them fairly. PRIN 7: A firm must pay due regard to the information needs of its clients, and communicate information to them in a way which is clear, fair and not misleading. COBS 2.1.1R: A firm must act honestly, fairly and professionally in accordance with the best interests of its client (the client's best interests rule). The provisions in COBS 9 which deal with the obligations when giving a personal recommendation and assessing suitability. And the provisions in COBS 19 which specifically relate to a DB pension transfer. Having considered all of this and the evidence in this case, I’ve decided to uphold the complaint for similar reasons to the Investigator. That’s because the redress proposed by the Investigator already allowed for Ms V drawing benefits directly from the DB scheme on appropriate advice. So, even though Ms V has confirmed she used the tax-free cash to help her daughter to buy a home, I think the DB tax-free cash in combination with some of her other assets would have provided her with a sufficient amount to do this and therefore the proposed redress still stands. I’ll explain why in the rest of this decision.

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I’ll firstly address Quilter’s point that the field of pension transfer advice is so tightly regulated and involves complex qualifications such that it shouldn’t be possible to deem a transfer unsuitable after the event. That’s a plainly unsustainable argument which has been borne out not only in the experience of this service but the regulator itself when ordering past book reviews of DB transfer business. Tight regulation is no guarantee to mis-sales occurring, whether intentionally or not, and the Financial Ombudsman Service exists when a pension scheme member considers this has happened to them. Further, Quilter implies that the Investigator has simply substituted his own view of suitable advice in this case with its own adviser’s. I agree that it isn’t the role of our service to advocate for one suitable piece of advice being better than another (albeit suitable) piece of advice. But again, I can’t see that’s what has happened here. The key reason for that is in the Financial Conduct Authority’s presumption in COBS 19.1.6G that the starting assumption for a transfer from a DB scheme is that it is unsuitable. If Quilter couldn’t demonstrate, on contemporary evidence, that the transfer was in Ms V’s best interests, it shouldn’t have recommended it. If remarks have been made by the Investigator, and myself below, about alternative courses of action Ms V could have taken to suitably achieve her objectives, then that is a result of a failure by Quilter to adequately consider those alternative courses of action – and, by doing so, demonstrate that it was in her best interests to transfer. If transferring to access benefits wasn’t in her best interests, then that leads to the conclusion that Ms V should be put back into the position whereby she’d remained in the DB scheme and accessed benefits from that scheme instead. Ms V’s objectives On the 2018 fact find no objectives were recorded in the space available to do this. So I’ve drawn from the suitability report to establish what these were. Notably, Ms V didn’t have any apparent need for an income from her pensions, despite being four years after the normal retirement age of the DB scheme. Although she was unsure about her continuing health, she would potentially continue to work until age 70, but before that point an additional £8,000pa in state pension would come onstream. Given that Ms V worked several part time roles, it was conceivable that she wouldn’t carry on all of these roles to age 70, so I expect the state pension could be absorbed into her overall income needs. As this was mentioned, it might appear that one of the prompts for Ms V being referred for DB transfer advice was that other members of her DB scheme were getting advice on transferring, and she was looking to explore the same thing. I say this noting that Quilter recorded that there weren’t any concerns about the scheme funding. Transfer values at that time were increased due to low annuity rates. But I don’t agree, and nor I note does the regulator, that simply having an attractive transfer value available is enough reason to transfer. And to be fair to Quilter here that doesn’t seem to be Ms V’s main motivation for transferring, now that the Investigator has asked her again about this. Ms V told the Investigator that she wanted to access her pension to have funds to help her daughter. But she also recalls she didn't like the idea of her pension dying with her, because her beneficiaries were her two children. She liked the idea at the time of dipping into the fund for ad-hoc spending (although to date she hasn't done so). This mirrors what’s described in the suitability report as “future aspirations and objectives”, where repaying Ms V’s buy to let mortgage, home improvements and gifting were all discussed. Ms V didn’t mention repaying the buy to let mortgage in her recent discussion

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with the Investigator, suggesting that it wasn’t as high a priority – and I can see why. She was evidently already overpaying on the mortgage, it wasn’t secured on her own home, covered by rental income and could – as an alternative to repaying it – be paid off by the sale of the second property. This is consistent with the reasons why the Quilter adviser challenged Ms V on this objective being necessary at the time. Whilst Quilter now says that repaying the mortgage would give Ms V a similar degree of security to having a DB pension, I don’t agree - for the above reasons, and nor evidently did the adviser at the time. The answer the adviser got from Ms V was that she was concerned to protect her future position in the event she retired due to ill health. But that wouldn’t as far as I can see put the buy to let property at much risk given that she also had a pension she could draw on. Quilter now argues that not using the tax-free cash to pay off the mortgage would have depleted Ms V’s emergency funds and put the maintenance of the rental property and her own home at risk. Given the extent of Ms V’s other asset and income – which was already being used to overpay on the mortgage, that’s far from the case in my view. Ms V would also retain the option to sell the buy to let property if she needed to. The adviser’s recommendations shouldn’t have been dictated solely by Ms V’s thoughts, as he was tasked with giving her suitable advice given all of her wider circumstances and objectives – and which of those objectives should be considered higher priority. Unfortunately, it’s no easier to determine the priority of gifting money to Ms V’s daughter, because as the Investigator has noted no details were sought about the timing and amount of the gift – and whether it might perhaps need to be matched by a further gift to her son in due course. Given that a transfer would relinquish guaranteed benefits in the DB scheme – a major source of retirement income – I think this should have been explored further before advising Ms V to transfer for this reason. Indeed, Quilter now describes this at one point as not an immediate requirement. After touching on these future aspirations, the adviser’s summary in the suitability report returned to the control and flexibility aspects of having a personal pension. In Ms V’s particular case the flexibility aspect had a particular advantage in terms of death benefits. Even if it was the adviser who introduced this point into the discussion, I can see why Ms V would have been attracted to this as she was recently divorced. The adviser added: “…Your expenditure, once your mortgage has been repaid, is likely to be similar to now which is £8,256pa so you will have enough income from other sources, which will be guaranteed. You therefore feel that you can afford to be more flexible with the funds in your [DB] pension. You are aware of the risks of transferring away from your [DB] pension but you feel that this is a risk worth taking in order to take control of your pension fund.“ To the extent that rental income can be guaranteed – it plainly cannot in the same way as a state pension – the adviser seemed to be assuming that Ms V would keep the buy to let property throughout retirement. That was despite a lot of her wealth being tied up in it, so there was no particular reason for assuming that would be the case. I consider the only income Ms V could rely on in the same way she could the DB pension (if she remained in the scheme) was her state pension. Given that the state pension isn’t considered particularly generous, and Ms V had accumulated significant pension wealth, this was hers to spend as she saw fit in retirement – given the greater amount of spare time she would then have outside work. I think it was somewhat artificial to presume Ms V’s spending pattern would remain unchanged, and as a result I consider the further guarantees provided by the DB scheme in addition to her state pension shouldn’t have been dismissed so easily.

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In particular, I don’t accept Quilter’s argument that the guarantee provided by Ms V’s new employer’s pension – even if she bought an annuity from it – provided enough reason for giving up the much greater guarantees in the DB pension fund. On the contrary, as the death benefits were already more flexible in the new employer’s scheme it stands to reason that Ms V wouldn’t additionally want to commit that to an annuity. I therefore agree with the Investigator that this case, just as with many others, should be approached from the point of view of whether it was in Ms V’s long-term interests to relinquish a significant source of future guaranteed income in the DB pension, when it wasn’t strictly her only option for accessing tax-free cash: she could draw benefits directly from the DB scheme and if necessary reinvest the income she didn’t need to negate the tax consequences. Ms V dipping into her other assets, such as the ISA and bonds, to fund any extra cash requirement involved some risk. But so did transferring out of the DB scheme to release a higher amount of cash. These risks were therefore inter-related. Whether Ms V should have been suitably advised to make the DB transfer depended, as it most often does, on her attitude to and capacity to accept the risks. Ms V’s attitude to risk Ms V completed a questionnaire with Quilter in which she agreed with statements including that: - People would describe her as a cautious person - She felt comfortable about investing in the stock market, although generally looked for safer investments. - She associated ‘risk’ with ‘opportunity’ but generally preferred bank deposits to riskier investments - She tended to be anxious about investment decisions and was concerned by volatility. Ms V had also disagreed that she found investment matters easy to understand, or that she was willing to take substantial financial risk, or that she would do so rather than increasing how much she saved. This came out as a ‘balanced’ risk overall, which was 3 on Quilter’s scale from 1 (risk averse) to 6 (adventurous). This is just below the middle of the scale, whereas some other advisers use an odd number of categories and put that what they might call medium or balanced in the middle. Quilter’s ‘balanced’ was described as: “Balanced investors typically have modest levels of knowledge about financial matters. They may have some experience of investment in riskier assets. In general, Balanced investors prefer not to take much risk with their investments, but will do so to an extent. They prefer lower risk assets, but realise riskier investments are likely to give better longer term returns. Balanced investors can take some time to make up their mind on financial matters and can often suffer from regret when decisions turn out badly.” I note this was the same result as in 2014 when Ms V was investing the proceeds of her divorce, although there are some differences: back then she disagreed that she generally looked for safer investments, had no strong opinion on preferring bank deposits or being concerned about volatility. That suggests to me that Quilter’s ‘balanced’ category, which was already put in slightly more cautious terms than I’ve seen some other advisers use, was a fairly wide bracket – and, if anything, Ms V had moved further towards the lower end of it by 2018.

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I accept that Ms V did have the capacity to take some risk, given the value of her buy to let property and other savings and investments. Although the extent to which these might later be used to gift to her children further into retirement is unclear, they were at that time a comparable value to the guaranteed income the DB pension would provide her. However I don’t think this changes that for a person with Ms V’s attitude to risk the inherent guarantees in a DB scheme and the transfer of risk from employer to employee that results from leaving it, are typically going to indicate a preference for remaining in the scheme. That is, absent a clear demonstration that it was financially viable or there were other compelling reasons for transferring that couldn’t be met in a different way. Financial viability The adviser explained that the cost of replicating the guarantees under the DB scheme by transferring and purchasing an annuity was £422,610. This was £45,490 or 12% more than the current transfer value, which he said was due to the high cost of purchasing an escalating annuity. So, he noted the residual fund after tax-free cash could buy an immediate single life level annuity of £13,791pa instead. This included 100% value protection, meaning that the original purchase price less income already received could be paid out to Ms V’s children on her death. If Ms V left the DB scheme, I think that immediate annuity could have been attractive to her because it avoided the complete transfer of risk from the employer. However, the adviser didn’t actually recommend it because she didn’t (yet) need the income. So as a result, the advice to transfer exposed her to the risk that the invested funds after charges would underperform the return necessary for any future annuity to keep pace with the DB scheme pension. And because the annuity wasn’t recommended, we don’t know whether Ms V would have been prepared to accept the trade-off of a level pension against future inflation, which is essentially what makes this level annuity look more valuable than the scheme pension. If Ms V bought a level annuity – either immediately after transferring or in future – there was likely to be an increasing shortfall against the index-linked DB pension in the later years of her retirement. Arguably that might have come at a time when Ms V was less active and didn’t need as much income, but equally the impact of inflation would increasingly reduce the income she would already have been receiving in real terms. Using income drawdown to provide her income avoided committing to a level pension, but relied on investment returns to support not only the ongoing income but future inflationary risks. Given Ms V’s attitude to risk, and given that the adviser recommended transferring not for immediate income but to defer taking an income, I’m not persuaded that she should have been expected to accept these multiple risks. It meant the transfer wasn’t financially viable for her in my view. Unusually in this case, however, staying in the scheme and doing nothing wouldn’t necessarily be considered financially viable either. Ms V was single, meaning there would be no spouse’s pension to pay when she died in receipt of the DB pension – and likely just a return of contributions if she died before drawing it. She had also gone four years past the normal retirement age of that scheme. Whilst there would be a late retirement factor, this relied on her living long enough to collect the resulting increased income. I think Ms V’s concerns about the poor health she’d suffered in the past aren’t dissimilar to the concern any single DB scheme member will have that they might die before they, or their heirs, had obtained enough value from the inflexible format of the benefits. And that situation is made worse by remaining in the scheme beyond the normal retirement age, because it can be avoided by drawing income and then reinvesting it elsewhere – without necessarily

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triggering a higher rate tax charge in many cases. That will then alleviate some of the risk of leaving nothing for their heirs. I consider the alternative of taking immediate benefits from the pension scheme provided a reasonable basis for why Ms V didn’t need to transfer out of it. At the same time as the tax- free cash she was seeking, she could secure the value of the guaranteed pension and tax- efficiently build up additional pension funds. These could both act as a buffer against future income needs and the ‘ad hoc spending’ Ms V has referred to, but also allow those funds built up on a defined contribution basis to be inherited by her children. The outcome of this case in my view comes down to whether Ms V’s concerns about her health were such that she would have had a negative view even of taking the DB pension immediately and building up these other funds outside the scheme – given this option wasn’t put to her at the time. Death benefits Death benefits are an emotive subject and of course when asked, most people would like their loved ones to be taken care of when they die. The lump sum death benefits on offer through a personal pension was likely an attractive feature to Ms V - particularly as they were being compared with remaining in the DB scheme, getting less tax-free cash, and continuing to forgo ongoing income. But as I’ve said above, these weren’t the only options open to Ms V. Given that Ms V was actually noted to be in good health at the time, I’m satisfied Quilter’s priority here was to advise her about what was best for her retirement provision. A pension is primarily designed to provide income in retirement. And I don’t think Quilter adequately explored, or warned Ms V about, the extent she was prepared to accept a potentially lower future retirement income in exchange for higher death benefits. This DB income was guaranteed and it escalated: it wasn’t dependent on investment performance, whereas the sum remaining on death in a personal pension was. Because Quilter didn’t carry out a detailed cashflow analysis, it wasn’t possible for Ms V to see how much less the drawdown pot might by the point she was likely to die. In my view too much emphasis was placed, by omission, on the greatly improved position if Ms V died soon after transferring, when there was little evidence to support that being the most likely outcome. Ms V’s children were not noted to be dependent on her and would likely inherit a significant amount of her other assets if her retirement income needs were fully taken care of by the DB pension. Evidently the adviser’s view of Ms V’s health wasn’t such that he thought Ms V would likely obtain enhanced annuity rates, because he quoted for a standard annuity. In view of this I don’t think Quilter should have encouraged Ms V to prioritise the potential for higher death benefits through a personal pension over her security in retirement. Overall, I don’t think the improved death benefits available through a transfer to a personal pension justified the likely decrease in the overall value of retirement benefits for Ms V. So, if she could have met her immediate tax-free cash need without transferring, and on being given appropriate advice, I consider on balance she would most likely have done that. How could Ms V have met her tax-free cash need? COBS 19.1.6 (4)(e) states that in assessing suitability a firm should take into account “alternative ways to achieve the retail client’s objective instead of transfer, conversion or opt-out…”

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Taking benefits directly from the DB scheme would have provided about £28,000 less tax- free cash. The actual amount Ms V needed to give to her daughter, or for home improvements, weren’t recorded at the time of advice and potentially weren’t known. In the event Ms V has said she used the full amount of tax-free cash she released to give to her daughter, but she hasn’t needed to dip into her drawdown pot for home improvements. Whilst she didn’t use the tax-free cash to pay off her buy to let mortgage, there wasn’t a pressing need to do that in any case – as the adviser himself recorded at the time. Therefore, if Ms V only released £66,139 tax-free cash from the DB scheme and had decided she wanted more to give to her daughter – either at that immediate point or in future – she would have been able to choose which of her other assets to release this from. There were several candidates. The stocks and shares ISA alone would have provided a sufficient sum, but so would either of the investment bonds. The adviser recorded that she didn’t want to touch these investments, it appears because of the tax efficiency of the ISA and the guaranteed nature of the bonds. But when advised to do so, Ms V did surrender the guarantees in the DB pension which I consider were much wider reaching than the guarantee that the investment value of a bond simply wouldn’t drop below its initial investment. So that suggests to me that Ms V was reliant on the advice she was given. I note Ms V was later prepared to surrender one of the bonds to invest in shares in her employer. She could also make fresh ISA and/or pension contributions as a result of drawing the DB pension, which I’ll discuss below. So in summary I don’t think when suitably advised, Ms V would have felt there was a barrier in accessing some of her other assets to supplement a gift to her daughter. What could Ms V do with the excess DB scheme income? At least initially, it seems Ms V wouldn’t need to use all, if indeed any, of the DB scheme income. However this assumes that she didn’t repay the buy to let mortgage any more quickly. Whilst she didn’t seem to regard paying this off immediately as a high a priority as the gift to her daughter, that’s not to say that she wouldn’t have been prepared to increase her overpayments from the extra DB income. And in fact over the term until she expected to retire at age 70, that extra income would more than outweigh the shortfall in tax-free cash from the DB scheme. I doubt that this income would have put Ms V into the higher rate tax band given the pension contributions she was already making to her employer’s scheme. But in any case Ms V could also have reinvested the DB income tax-efficiently. Drawing benefits from a DB scheme doesn’t cause pension contributions to be limited to the Money Purchase Annual Allowance – and for the time that Ms V remained working she could re-contribute as much of this income as she wanted back into a pension, such as her then-employer’s scheme (or a pension Quilter could have sold to her). Alternatively, she could have saved some of it back into an ISA particularly if she used her existing ISA as part of the gift to her daughter. Summary I don’t doubt that the flexibility, higher tax-free cash and superior death benefits on offer through a personal pension would have sounded like attractive features to Ms V. But Quilter wasn’t there to just transact what Ms V might have thought she wanted. The adviser’s role was to really understand what Ms V needed and recommend what was in her interests. Ultimately, I don’t think the advice given to Ms V was suitable. She was giving up a guaranteed, risk-free and increasing income. By transferring, Ms V was very likely to obtain lower retirement benefits and in my view, the option of drawing benefits directly from the

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scheme which she’d already deferred beyond normal retirement age better met her needs. With reinvestment into pensions or ISAs employed to any extent required to mitigate the loss of flexibility that the drawdown plan provided. So, I think Quilter should’ve advised Ms V to remain in her DB scheme. And I consider Ms V would have followed that advice when there was a strategy for what to do with the extra income, as it clearly met the only clear purpose she had for the money at that time which was the gift to her daughter. Quilter says that given the timescale for Ms V needing to access tax-free cash was unclear, it would be more logical to say that Ms V would have remained in the DB scheme without drawing benefits. But I think Ms V was entitled to the benefit of Quilter’s insight that this would potentially worsen the death benefit situation further. And whilst Quilter says that reinvesting the pension income was no different to going into drawdown, this ignores the clear benefit of retaining the underlying DB guarantees. Given Ms V hasn’t bought an annuity, the improvement in annuity rates since 2018 may mean she hasn’t suffered a loss. But I still consider it’s fair that Quilter assesses whether there is in fact any loss and if so, pays compensation. Putting things right Quilter Financial Services Limited must 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: https://www.handbook.fca.org.uk/handbook/DISP/App/4/?view=chapter. Our Investigator considered that this calculation should assume that Ms V drew the maximum tax-free cash and pension from her occupational scheme and AVC fund as soon as was practicable after the advice was given. He thought it was reasonable to assume that Quilter contacted the scheme four weeks after the date of its recommendation, which would take the timescale to 6 July 2018, and left it open to Quilter to ascertain how long it would have taken the scheme to process Ms V’s request. I agree with the Investigator’s initial assumption, but as this is a Final Decision, to leave the parties in no doubt I’m going to assume that Ms V’s benefits would have been paid with effect from another four weeks from 6 July 2018 – that is, on 3 August 2018. The loss assessment calculation should be carried out using the most recent financial assumptions in line with DISP App 4. In accordance with the regulator’s expectations, this should be undertaken or submitted to an appropriate provider promptly following receipt of notification of Ms V’s acceptance of this decision. If the redress calculation demonstrates a loss, as explained in policy statement PS22/13 and set out in DISP App 4, Quilter should: • calculate and offer Ms V redress as a cash lump sum payment, • explain to Ms V 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 her pension funds (which I now understand are with True Potential) • offer to calculate how much of any redress Ms V receives could be augmented rather than receiving it all as a cash lump sum,

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• if Ms V accepts Quilter’s offer to calculate how much of her redress could be augmented, request the necessary information and not charge Ms V for the calculation, even if she ultimately decides not to have any of her redress augmented, and • take a prudent approach when calculating how much redress could be augmented, given the inherent uncertainty around Ms V’s end of year tax position. Redress paid directly to Ms V as a cash lump sum in respect of a future loss includes compensation in respect of benefits that would otherwise have provided a taxable income. So, in line with DISP App 4.3.31G(3), Quilter may make a notional deduction to allow for income tax that would otherwise have been paid. Ms V’s 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. My final decision I uphold Ms V’s complaint and require Quilter Financial Services Limited to calculate and pay her any compensation as set out above. Under the rules of the Financial Ombudsman Service, I’m required to ask Ms V to accept or reject my decision before 8 April 2026. Gideon Moore Ombudsman

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