AFH Independent Financial Services Limited · DRN-6220809

The complaint Mr P complains that AFH Independent Financial Services Limited trading as AFH Wealth Management (AFH) delayed the payment of his tax-free cash (TFC) from his pensions causing inconvenience and losses. He wants compensation for the financial losses suffered. What happened Mr P was retired and says he wished to access his TFC from his pensions with Standard Life and Fidelity to assist his daughter with urgent financial problems around her divorce, but he had no requirement for additional income. Mr P met with his adviser from AFH who obtained information about these plans and then issued a suitability report on 5 November 2024. This recommended both plans be transferred to a Pershing Self-Invested Personal Pension Plan (SIPP) with TFC taken under drawdown and the residual funds invested in a Discretionary investment portfolio managed by AFH. It said its initial charge of 3% on the net of TFC transfer values (estimated at £3,448.88) would be the same whether the plans were transferred or not and that its ongoing advice fee was 1% per annum. AFH said transferring was suitable advice because the existing Standard Life plan couldn’t facilitate drawdown. And whilst the Fidelity plan offered drawdown, it couldn’t facilitate payment of adviser charges which AFH said Mr P would “prefer”. The report also explained why AFH considered the recommended investment strategy to be advantageous over the existing plans despite being more expensive, and said it had “concluded that these charges are fair value.” Mr P accepted the recommendations; the SIPP was set up and transfer requests made to Standard Life and Fidelity on 6 January 2025. Standard Life transferred £27,228.47 on 10 January 2025 and Pershing wrote to Mr P saying the transfer had been moved to the “SIPP account for investment”. The other transfer of £126,849.88 wasn’t completed until 27 March 2025, whilst Fidelity carried out due diligence checks. On 7 April 2025 Mr P emailed AFH saying he understood both transfers had been received and queried why his TFC hadn’t been paid. Several exchanges followed before TFC of £35,943.78 was received by Mr P on 17 April 2025. Mr P queried this as he’d expected around £38,380.29, based on the Fidelity transfer value and the SIPP valuation at the end of February 2025. AFH said this was based on the value of the SIPP being £143,775.14 on 14 April 2025. Mr P complained saying his pensions had been mismanaged having fallen in value through being invested pending the payment of the TFC. He said when chasing the transfer with Fidelity it had told him it could have paid the TFC before completing the transfer to the SIPP and he asked why AFH hadn’t suggested this. AFH looked into Mr P’s complaint and upheld it, accepting its service wasn’t as good as it should have been. It said once the second transfer was received it sent documents requesting the payment of the TFC to Pershing, but having reviewed the timeline said the TFC should have been paid on 4 April 2025, based on the value the day before. It said had it, the TFC would have been higher and with interest added for the delay offered Mr P £2,033.60 plus a further £200 as a gesture of goodwill for the inconvenience. Mr P didn’t accept this as he felt he’d also suffered investment losses, putting the total figure at around £5,150. He said the compensation payment for the inconvenience should be higher and that AFH should refund the adviser fees taken, given the “non-compliance” with his instructions.

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Mr P referred his complaint to our service and our investigator looked into it, and he upheld it in part. Our investigator said it was clear Mr P had wanted to access his TFC promptly and whilst the Fidelity transfer had taken some time to complete there was no reason why the TFC on the Standard Life transfer wasn’t paid following receipt and there had been no need to fully invest this transfer before doing so. He said to compensate Mr P fairly, AFH should calculate what the TFC would have been on the Standard Life transfer value and assume this would have been paid five working days after receipt (17 January 2025), with interest added at 8% per year simple until 4 April 2025. He said this amount then needed to be added to 25% of the Fidelity transfer value received on 27 March 2025. And if this was greater than the TFC amount actually paid, any shortfall needed to be paid to Mr P with interest to date. Our investigator said AFH would also need to consider whether any investment losses had been caused and if so, compensate Mr P accordingly. And he said it should increase the compensation for distress and inconvenience from £200 to £400. AFH said the proposed calculations showed a shortfall of £2,575.81 plus interest to date, but that it considered the £200 compensation offered to be fair. Our investigator said £400 compensation was fair as Mr P had urgently wanted the funds and consequently had been caused a greater degree of inconvenience. Mr P initially agreed with our investigators view of the complaint before changing his mind. He said the shortfall calculated was “well short” of his overall loss of £5,148.69 and didn’t include any refund of charges. He said AFH had sought to use an increase in his fund value (on 22 April 2025) to reduce his losses which had been realised by 17 April 2025 and he hadn’t been put back into the position he should have been in. And he said AFH’s failure to advise him to take TFC directly from the existing providers before transfer hadn’t been considered As Mr P doesn’t agree it has come to me to decide. 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. Having done so, I’m upholding the complaint in part. I’ve considered all the points made by Mr P carefully, but I think the loss calculations proposed by our investigator are fair and do put him back into the position he would have been in but for the error. And I think that £400 compensation for the distress and inconvenience caused is fair in the circumstances of the complaint. I’ll explain why. Mr P’s losses How long the transfers would take to complete was outside AFH’s control, but Mr P is quite correct in that the TFC could have been paid directly before the transfers were made. In the case of Standard Life, this would have required an internal transfer to be arranged and might not have saved any time given the transfer to the SIPP was promptly completed. But TFC could have been paid directly from the Fidelity plan, and this option might have been considered once there was a delay on the completion of this transfer. That it wasn’t, I think is fairly reflected in the award for the distress and inconvenience caused by the delay and the interest added for late payment. Likewise, AFH charged fees for its various services, some in addition to the arrangement of the TFC. As the redress I’ve set out below corrects the consequences of the errors AFH made, it wouldn’t be fair for me to also tell it to refund the charges that Mr P had agreed with

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it. However, if Mr P feels AFH failed to provide him with any other agreed services, he should raise this with it separately. Where I think AFH was wrong was in delaying the payment of the TFC once the transfers had been received. It has said it is its process to wait until all transfers are received before processing benefit requests. But it didn’t tell Mr P that, and it knew he wanted the funds as soon as possible. Investing the funds instead delayed this and introduced the risk that the future amount of TFC might reduce. There was also a delay after the second transfer was received (which it accepts) while documentation around taking the TFC was dealt with, and I think that this should have been in hand given Mr P’s objectives. So, I think comparing the TFC that was available from the actual transfers received, before any investments were made and paid within five working days of receipt of the transfers, with interest added for the delay in payment to the actual TFC paid in April 2025 is a fair way to compensate Mr P for his loss. AFH’s recommendation, accepted by Mr P, was always to invest the residual funds on a long-term basis, largely based in equity (share) type investments. And the suitability report set out the risks that investment values could rise or fall with market conditions. Following President Trump’s “Liberation Day” tariff announcements on 2 April 2025, investment markets reacted negatively, before recovering strongly a few weeks later. Had there been no error on the TFC being paid the funds already invested would still have been exposed to those market movements. And the portfolio valuations provided show holdings and percentage allocations I would consider to be typical for the stated risk profile and investment objective, so there is no indication of any misadministration here. Putting things right My aim in awarding compensation is to put Mr P as closely as possible back into the position he would have been in but for the errors made by AFH. • Mr P wanted the TFC paid promptly and the delays here were avoidable and he may have been caused losses as a result. To establish whether any loss has been suffered AFH must, a) From the transferred in Standard Life fund received on 10 January 2025, 25%, being the TFC available, should be deducted and presumed paid to Mr P five working days later on 17 January 2025. Interest at 8% per year simple should be added to this sum until 4 April 2025. b) From the transferred in Fidelity funds received on 27 March 2025, 25%, being the TFC, should be deducted and added to the total from a) above. If the total of a) and b) is lower than the actual TFC paid to Mr P there is no loss. If the total is higher, then Mr P has a loss. And the shortfall should be paid to him with interest added at 8% per year simple from 5 April 2025, when the TFC could have been paid, until the date of settlement. As any shortfall payment (apart from interest added, see below) would have been free of tax there is no requirement to notionally reduce it for income tax purposes. c) AFH must pay interest on the actual TFC that was paid to Mr P between 4 April and 17 April 2025 at the rate of 8% per year simple to reflect the delay in payment of this sum. d) AFH must then calculate the notional value of Mr P’s fund had the TFC been paid as set out in steps a) and b) and only 75% of the net transfer values (after agreed charges) been invested and compare that to the current value of the plan. If the notional value is higher, then Mr P has a loss and this must be compensated.

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• Any compensation due under d) above should if possible be paid into Mr P’s pension plan. The payment should allow for the effect of charges and any available tax relief. The compensation shouldn’t be paid into the pension plan if it would conflict with any existing protection or allowance. • If a payment into the pension isn’t possible or has protection or allowance implications, it should be paid directly to Mr P as a lump sum after making a notional reduction to allow for future income tax that would otherwise have been paid. This isn’t a payment of tax to HMRC, but an adjustment to ensure Mr P isn’t overcompensated. • If Mr P has remaining tax-free cash entitlement, 25% of the loss would be tax-free and 75% would have been taxed according to his income tax rate in retirement, which he has confirmed is 20%. So making a notional reduction of 15% overall from the loss adequately reflects this. • Income tax may be payable on any interest paid. If AFH deducts income tax from the interest, it should tell Mr P how much has been taken off. AFH should give Mr P a tax deduction certificate in respect of interest if Mr P asks for one, so he can reclaim the tax on interest from HM Revenue & Customs if appropriate. • AFH must provide Mr P with a simple calculation of how it worked out the figures. • AFH must pay Mr P £400 in compensation for the distress and inconvenience he’s been caused, which I consider to be fair in the circumstances of the complaint. My final decision My final decision is that I uphold this complaint against AFH Independent Financial Services Limited. I direct AFH Independent Financial Services Limited to complete the loss calculations set out above and pay any compensation due. I further direct AFH Independent Financial Services Limited to pay Mr P £400 in compensation for the distress and inconvenience he’s been caused. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr P to accept or reject my decision before 20 May 2026. Nigel Bracken Ombudsman

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