DRN-6248979

The complaint Mrs H complains that her policy with St. James's Place Wealth Management Plc has lapsed without any value. What happened Our investigator set out the complaint and the background to it, for ease of reference I have included an amended copy of this below: ￿ Mrs H has questioned the suitability of the plan that was set up as the adviser was made aware that she would not be returning to work after her maternity leave. She says the premium was below SJP’s minimum. ￿ SJP said Mrs H was leaving employment in August 1996, whereas she was actually going on paid maternity leave. She says in error SJP failed to collect contributions from her employer during this period. ￿ A Member Charge was being taken from her plan of which she wasn’t made aware of. Mrs H says the document SJP has now provided is different from the illustration she was given at the time she took the plan out, which didn’t mention this charge. ￿ SJP closed her pension in 2003 but failed to notify her and tell Mrs H why. Mrs H also said that the previous valuations showed that the plan had a value and had not been eroded by charges. Mrs H doesn’t understand how it lost its whole value in one year. ￿ Mrs H referred to SJP saying that ongoing advice wasn’t part of the service they would provide with the plan. However, she says the illustration referred to an ongoing service, as did the adviser, which she never received. ￿ Mrs H says she was shocked at being told that her plan had no value and the stress and inconvenience this matter, and dealing with SJP has caused her. She expected the value of the plan to be around £4,000 to £5,000. This takes account of the value of a plan she held with another company. On 25 September 1996 an SJP (formerly The J. Rothschild Partnership) adviser wrote to Mrs H confirming that a J. Rothschild Assurance (JRA) Personal Retirement Plan had been recommended. The letter noted that Mrs H’s then employer would be making the contributions and that at present Mrs H had chosen not to make personal contributions. The letter also confirmed that a ‘Personal Illustration’ setting out the projected benefits and ‘Key Features and Further Information’ booklet were discussed at the meeting with the adviser and these documents and ‘terms of business’ letter were left with Mrs H for her information. SJP have provided a copy of a document they referred to as a ‘Key Features Illustration’ that was prepared on 24 September 1995. This was a four-page document, page 1 included projected pension benefits based on contributions continuing until the selected retirement age of 65. Page 2 included a contribution summary showing the gross employer contribution of £35.90pm. It noted that “The monthly contribution was below the Company’s minimum.” It

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also confirmed how the contributions would be invested. Page 3 gave examples of the transfer values that might be available over the life of the plan assuming contributions continued. It also included the statement “WARNING – if regular contributions stop in the early years the transfer value could be less than you have paid. The JRA Personal Retirement Plan is a long term contract to provide you with pension benefits…” Page 4 included three sections “Allocations of contributions to units and deductions”. This set out details of the charges, as follows: ￿ 95% of the regular contributions would be allocated to units. ￿ The first 24 months contributions would be allocated to Capital Units which incurred a 4% annual charge. ￿ From the 25th month onwards, contributions would be allocated to Accumulation Units which incurred a 0.25% annual charge. ￿ There was also a bid offer spread of 5%. This was the difference between the price units were bought at (the offer price) and the price they were sold at (the bid price). ￿ There was a Member Charge of £42.00 per annum which increased in line with the Average Earnings Index. It confirmed that this was collected by cancelling units. ￿ There was a cost for managing and maintaining the investments of 0.25% a year that was charged to the fund. The second section under the heading “How much the advice cost?” confirmed that the “For arranging this plan and providing ongoing service throughout its term…” JRA “…would provide the practice with direct remuneration and administrative services.” This confirmed that in the first year this would be £167.04 and £173.52 in the second year, followed by varying amounts depending on the value of the fund. It gave an example of this saying based on 9% pa growth the charge would be £6.48 in the third year increasing to £126.13 in the final year. The third section included “Notes” about the illustration. The application form which was signed on 27 September 1995 recorded that Mrs H’s employer was contributing 5.26% of her salary, the salary was recorded as being £8,192pa. On the 9 October JRA wrote to Mrs H confirming they had received her employer’s direct debiting instructions and they would ask her employer’s bank for contributions when due. SJP wrote to Mrs H on 12 August 1996 stating that “…you are no longer working for this employer…” and went on to say “I have placed your plans on a contribution holiday and have assumed the last contribution paid was that due on 2 September…” SJP also provided a “file copy” of a “Replacement Schedule” dated 13 August 1996. This confirmed that the policy was paid up. It also noted that a policy charge of £43.37 a year would apply which would increase by the Average Earnings Index. There was also a handwritten file note dated 14 August 1996 referring to “Leaver Adjustments” that noted that Mrs H (and another lady) were going on maternity leave and that the members contributions were to be put on holiday until “they return to work”. In the submission Mrs H provided she said that the illustration she had on file didn’t match the one that SJP had provided a copy of to her. Mrs H provided two unnumbered pages of

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an illustration, the first page which included details of the “Contribution Summary” showing the contribution of £35.90 and a second page which included three sections “How much will the advice cost?” which detailed the payments made to the adviser and stated “These amounts are paid out of the deductions shown and are included in the illustration above”. The second section giving details of the “Adviser’s status” and a “Notes Section” which stated “The figures contained in this document are for illustrative purposes only and should be read in conjunction with the Key Features Booklet…” The investigator did ask if Mrs H could provide a full copy of the document she had received and Mrs H confirmed that she only had two pages of the illustration. Mrs H provided copies of the following statements showing valuations and contributions. SJP have been unable to provide a copy of the 1996/1997 statement: On 15 December 2006 SJP wrote to Mrs H, the heading of their letter was “Secure An Advantage by Exploring your Retirement Options.” The letter referred to Mrs H being an existing customer of SJP and referred to the importance of regularly reviewing her finances. The adviser also said he would call in the next few days to arrange a convenient time for a financial review. Our investigator looked into matters but concluded that Mrs H’s policy lapsed with no value due to the charges that applied to it and that SJP hadn’t done anything wrong. He said: • The additional contributions that Mrs H believed should have been collected during Maternity leave would have been the responsibility of the employer. And even if they had been paid, the charges meant the policy would still have lapsed without value. • The annual valuations didn’t indicate the policy would lapse and it’s unclear why the value remained stable. SJP said it sent a notification that the policy lapsed but due to the time that has passed it doesn’t have a record of it. But it is the investigator’s view in light of the charges that should have been applied that the policy did lapse without value. • The letters in 2001 and 2006 didn’t mention a policy value so he didn’t think it reasonable to rely on those letters to assume it still would have a value now. • The illustration Mrs H had provided wasn’t a complete copy and was missing the charges section. • Suitability wise, the plan only received employer contributions, so even if it was unsuitable, Mrs H didn’t suffer a loss as she made no personal contributions. • He could see no evidence that ongoing advice was part of the contractual agreement.

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• SJP had offered to refund the contributions paid as a gesture of goodwill, the investigator felt this was fair in the circumstances. Following the investigator’s view SJP was able to provide more information about the plan, it explained its actuaries had confirmed that in 1996,1997 and 1998 it hadn’t deducted the member charges as it should. In 2003 it then deducted charges that caused the policy to lapse. It would then have written to Mrs H to let her know this was the case. It believed the large charges applied in 2003 were likely the charges that should have been taken between 1996-1998. Mrs H said in response she didn’t get a letter telling her the policy had lapsed. She expected the policy to be worth more because of the values she was given. SJP said they would keep the offer of the compensation to the value of contributions paid open regardless of my decision. 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. And having done so I agree with the outcome reached by the investigator and for broadly the same reasons. My findings will focus on the issues still disputed by Mrs H which is the policy lapsing without value. And the expectation set by the statements that it would be worth more. The evidence clearly shows that Mrs H’s policy was always likely to lapse without value once contributions stopped so early in the lifetime of the plan. Put simply the charges applied to the plan without any money coming in would erode the value of the plan and over a fairly short space of time. So I think it’s clear that this is what occurred and I don’t think SJP has done anything wrong here. This policy was recommended to receive Mrs H’s then employer’s contributions. The member charge was significant compared to the amount contributed and increased with the average earnings index. There was also a front-loaded charging structure for the first 24 months contributions. It appears the confusing initial values where the policy held its value despite the heavy early charging structure and then the sudden drop, were caused by the delay in applying the charges correctly in the early years. Once this was rectified the policy value went to 0. Whilst this certainly isn’t best practice, it hasn’t made any material difference to Mrs H, her policy was going to lapse in any event. I don’t think there is a requirement for a payment of compensation for this error, as I don’t think reasonably looking at the charging structure – this pension could have been expected to have provided a value in later years. There was also a warning to this potential consequence in the information provided to Mrs H at outset. And in any event SJP has offered compensation in excess of the amount the statement showed at its highest level. I appreciate it will have been upsetting for Mrs H to find that the pension has no value but the plan was designed to be a long term investment with contributions added over many years. With regards to her points about the contributions stopping when they shouldn’t have, the payment of contributions was ultimately her employer’s responsibility. If there was a mistake here it won’t have made any difference as the policy would still have lapsed. And due to the time that has passed we don’t have all the information to understand exactly what occurred here. Ultimately whilst the policy may have always been destined to lapse unless she stayed with the employer or made personal contributions, the alternative was just not to receive those contributions at all. Had Mrs H stayed with the employer for many years the policy

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likely would have been worth something in retirement. Overall I don’t think SJP has done anything wrong and so I won’t be making an award. However, it has confirmed that it will keep the offer open for acceptance for Mrs H regardless of what my decision says, so Mrs H will need to contact SJP to arrange payment. My final decision For the reasons explained above, I do not uphold this complaint and make no award. Under the rules of the Financial Ombudsman Service, I’m required to ask Mrs H to accept or reject my decision before 18 May 2026. Simon Hollingshead Ombudsman

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