DRN-6273559

The complaint Mr F’s representative has complained, on his behalf, that Quilter Financial Services Limited (Quilter) gave him unsuitable advice to transfer defined benefits (DBs) from two occupational pension schemes (OPS) in November 2017, saying that, as a result, Mr F has lost out financially. What happened Mr F was introduced to a qualified pension transfer specialist at Quilter and attended a fact find meeting on 4 October 2017. At this time, Mr F had already been provided with a Cash Equivalent Transfer Value (CETV) for the deferred benefits he had accrued under the DB scheme. The fact find recorded the following details about Mr F: • Mr F was aged 59 and married with two children, both financially dependent. • Mr F was employed, and also had self-employed income, with respective incomes of £39,000 pa and £9,000 pa. • Mrs F was 48, employed and earning £14,000 pa, £1,000 net pm. • Mr F’s preferred retirement age was noted as being 60. • Mr F owned his own home valued at £250,000 with an outstanding mortgage of £21,387 and five years remaining. • His cash savings were £9,000 in a cash ISA and a joint account balance of £14,000. • His attitude to “Risk and Reward” was agreed as “Dynamic Risk”. The CETV for Mr F’s DBs was £320,971.62, plus an AVC valued at £2,787.94, and the scheme had a normal retirement age of 65. In terms of Mr F’s deferred benefit entitlement, Quilter estimated that Mr F could expect an annual income from the scheme of £14,784 at age 65, or £10,015 if a pension commencement lump sum (PCLS) of £66,767 was taken. At age 60, Mr F’s deferred benefit entitlement was estimated by Quilter to be £9,629.91 pa or £6,712.82 pa if a PCLS of £45,090.24 was taken. In addition to the DB scheme, Mr F had £120,000 in his OIM self-invested personal pension (SIPP) and a further deferred DB scheme which would provide a pension income, as at 11 January 2023, of £3,325 pa or a tax free cash amount of £15,350 and a reduced pension of £2,302 pa, based on a transfer value (TVAS) report (no early retirement quote was provided).

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The fact find notes recorded that Mr F was looking to stop working as an employee and remain part time with his self-employed work. Mr F was seeking £1,500 pm income in retirement (in addition to Mrs Fs £1,000 pm income) so needed to make up a £900 net pm (£10,800 net pa) shortfall. Referring to the Suitability Report, Mr F’s ‘main driver’ was recorded as “to finish working with [his employer] at age 60, semi retire by working part time with your [self employment] and to start generating an income of £900 per month net. You like the idea of using a flexible access drawdown arrangement to facilitate this.” The main benefits Mr F was seeking were as follows – • The ability to generate an income and improved death benefits. • The ability to draw an income using the increased tax free cash as a bonus. • Flexible income/withdrawals that could be reduced at a later date. • Enhanced death benefits. Mr F’s financial objective as per the Suitability Report dated 13 November 2017 was to have a combined joint income in retirement of £2,500 net pm, and by transferring he could achieve more flexibility in retirement as he wanted to avoid taking benefits beyond his needs. Additionally, this would also provide the opportunity to create a legacy for his wife and children. The reasons given by the financial adviser for recommending the transfer were summarised as follows: • To provide flexible income in retirement. • Better death benefits and Mr F would be able to pass on any unused fund in full to his wife and children. • Access ongoing advice and the Quilter approach to investment (AIM) • Ability to have a larger tax-free lump sum. A recommendation was made, an application form was completed, the client declaration was signed and dated 3 April 2018, and the funds were transferred into the Quilter Retirement Account 1 May 2018 and invested in line with Mr F’s agreed Dynamic Risk profile. Based on the fund fact sheet provided dated 17 August 2017, the fund chosen was the Old Mutual Cirilium Dynamic Portfolio. Mr F’s representative raised a complaint on 20 February 2025 with Quilter about the advice as it felt that Quilter hadn’t explored all the options available for Mr F to achieve his objectives and had set out that only transferring could achieve this. Quilter responded on 15 April 2025, confirming that the transfer advice from one of the DB schemes had been reviewed on 19 May 2023, and a letter confirming this had been provided to Mr F setting out his rights to refer the complaint to this service within six months. As neither Mr F nor his representative had raised a complaint within the time limits, it was too late to raise it now, effectively time barring that part of the complaint.

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A complaint about the transfer of the DB from the other scheme was then referred to this service on 28 August 2025. As Quilter had objected to the merits of the complaints about the transfer of both DB transfers being considered, the investigator firstly needed to consider whether the complaint referred to us fell within our jurisdiction. Having done so, he concluded that it did, saying the following in summary: • The rules under which we operate are set out in the Dispute Resolution (DISP) rules in the Financial Conduct Authority’s handbook. The DISP rules below say that our jurisdiction applies only to complaints that are brought within the required timescales. • The relevant part of DISP 2.8.2 says that: The Ombudsman cannot consider a complaint if the complainant refers it to the Financial Ombudsman Service: (1) more than six months after the date on which the respondent sent the complainant its final response, redress determination or summary resolution communication; or (2) more than: (a) six years after the event complained of; or (if later) (b) three years from the date on which the complainant became aware (or ought reasonably to have become aware) that he had cause for complaint; unless the complainant referred the complaint to the respondent or to the Ombudsman within that period and has a written acknowledgement or some other record of the complaint having been received. • The complaint was referred to our service on 20 August 2025. As this was within six months of the date of the business final response letter (15 April 2025), the additional rules above needed to be considered. • The advice was provided in November 2017, so this was clearly more than six years before the complaint was raised, so consideration then needed to be given to whether the complaint was raised within three years of the point at which Mr F either was aware, or ought reasonably to have been aware, of having cause for complaint. • Quilter said that Mr F should have been aware that he had cause for complaint more than three years before he made his complaint on the grounds that he would have received annual statements showing the performance of his pension. • In some respects, given that the advice was accepted at the point of sale to transfer his existing personal pensions to Quilter, performance would be a plausible reason to question whether the advice was suitable. • A performance comparison revealed that, over the period since Mr F transferred to Quilter, the value of his pension did drop in value in 2020. However this was followed by a period of recovery, so it couldn’t be concluded with certainty that this this would have raised awareness that the advice was unsuitable.

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• This was further endorsed by the circumstances in 2020 at the time of the fall, being at the time of the pandemic. The historical performance also showed that the funds Mr F switched out of also fell in a similar way and indeed also went on to recover. • Mr F’s representative had confirmed that Mr F only became aware that he may have cause for complaint after it contacted him. • Quilter hadn’t yet provided evidence for Mr F’s awareness before that point, despite this having been requested. It would be expected that there would be evidence by way of a review, for example, where performance was brought up, or any specific contact regarding performance. • This was therefore a complaint this service could consider as the complaint was brought within three years of Mr F becoming aware that he may have cause for complaint. • There was no simple comparator that Mr F could use. His statements included two schemes that had been transferred, and he’d also made some ad hoc withdrawals. To be able to separate the original transfers and work out a comparison with the benefits he would have received with the DB scheme in question would be expecting too much from a consumer. • A withdrawal in October 2022 and 2023 did include an illustration showing, based on the value of Mr F’s pension pot at the time, the income he could receive by way of an annuity, however this was within three years of the complaint being raised. Quilter disagreed, however, saying the following in summary: • The investigator had concluded that the complaint was made in time, as Mr F didn’t have a simple comparator to use for the “clock” to start ticking. He’d also acknowledged that Mr F received statements, and also took ad hoc withdrawals in October 2022 and 2023 including illustrations, but had said that this was within three years of the complaint being brought by the client’s representative, which wasn’t in dispute. • He’d also indicated that he’d requested evidence from Quilter to demonstrate that the complaint was raised out of time, but that this hadn’t been provided. But it couldn’t identify any reference to such a request. • The investigator had also ruled out that the performance of the Quilter pension was a reasonable a trigger, because whilst the value dropped in 2020, this was followed by a period of recovery – and that this was backed up by the circumstances in the UK at the time, due to covid. • However, it didn’t accept that this was justification for the clock to not have started ticking in 2020. It had been asserted that Mr F didn’t have a simple comparator to use, but a consumer didn’t need knowledge of the technical grounds for making a complaint in order for the clock to start ticking. • By the time of the review in 2020, the value of Mr F’s Quilter pension had dropped from £375,000 in March 2019, to £328,944 in March 2020. This was when the country first went into lockdown.

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• This was notable, given the representative’s claim that Mr F didn’t want to take any investment risk (as recorded in the complaint letter). This was a significant drop in value, which in its view, should have made Mr F realise something was wrong. • This was also pertinent, given the size of this part of the client’s pension provision. As such the complaint had been made too late. • As referenced above, consumers aren’t required to know the technical grounds upon which they make a complaint in order to make that complaint. They only have to know or think, in layman's terms, that something has gone wrong. • It was worth noting that, whilst Quilter had relied on the valuations from the reviews in 2019 and 2020 (copies of which you were sent to this service in September 2025), Mr F also had access to statements and valuations at all times. The 2017 Suitability Report referenced the fact that Mr F could view his portfolio via the secure online customer services. In response, the investigator informed both parties that the matter would be referred to an ombudsman for review, but added the following commentary: • Mr F wasn’t the expert here and his complaint was about the financial impact of losing guaranteed benefits in retirement. Mr F had an annual review in February 2019 and again in March 2020. During this time his overall value fell, but it was recorded in his annual review that this was to be expected and that his portfolio remained suitable for him. By the time of his review in March 2021, his portfolio had fully recovered in value and his adviser was still noting that his portfolio was suitable. • Prior to the fall in value at the start of Covid, Mr F’s portfolio had not shown any high levels of volatility and following the fall he was given reassurance by his adviser. Again, Mr F wasn’t the expert here and no concerns were brought to his attention by his adviser that may have alerted him to conclude that anything was wrong. • Given that the recovery occurred that same year and into 2021, any concerns Mr F may have had about a drop in the value of his pension would have been mitigated. • Further, in 2017 Mr F’s attitude to risk and reward was agreed as Dynamic and this allowed for losses of up to 16%. The Suitability Report said the following: “You explained that you were happy to take a high degree of risk, you agreed that you were a Dynamic person and you feel this is crucial in terms of generating long- term returns. You have some experience of investing in a SIPP and you understand how your managed equity investments operate. After completing the risk profile questionnaire, we discussed the different profiles on the Intrinsic Guide to Investment. We decided that you would be happy with a higher level of risk and you accepted potential fluctuation of up to 16%.’ • This Dynamic risk profile was also agreed upon again in the answers to the risk profile questionnaire completed on 18 March 2020 and the Suitability Report said the following: “To reassess your risk profile, we again went through the 12 question Risk Profiling Questionnaire, and we agreed that your attitude to risk remains as Dynamic for your goals and objectives, we combine the output from the Attitude to Risk Profiler with your capacity for loss, the timeframe for your investment, and the need to take risk to

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create a risk profile for your objectives. We discussed your current circumstances in relation to the principles of risk and reward in respect of your investment planning both near and in the long term and again agreed your risk profile remains as Dynamic We considered your capacity for loss in relation to this objective and you remain happy with this risk profile. There will inevitably be times when the value of your investment could drop quite sharply. You need to be aware and be comfortable that you have the necessary capacity for loss to accept this. For example, in a single bad year this loss could be 15% or worse and the chances of this happening are 1 in 20 each year. We have discussed this and you continue to be happy with this level of volatility.” • Referring to the valuation in 2020 that accompanied the review, the fall in value was within the expected range for this level of risk and reward, so again this drop in value wouldn’t have been outside what Mr F had been led to believe was possible during his investment journey. I issued a decision on our jurisdiction to consider the matter on 26 March 2026, in which I set out my reasons as to why I thought it was a case which we could consider. The following is an extract from that decision. “I’ve considered the submissions from both parties to decide whether this is a case we can consider. And having done so, I’ve reached the same conclusions as the investigator, and for broadly the same reasons. But to add to the points already made, I’ve noted Quilter’s comment about a consumer not needing technical grounds upon which to bring a complaint - but they still need grounds. And the point the investigator was making, and with which I agree, is that the situation as known, or as would reasonably be known to Mr F, was that there was a period of downturn in financial markets caused by the pandemic. Irrespective of Mr F having sufficient financial acumen to be able to separate out the funds represented by the transfer in question and consider how they’d performed compared to the income he might have received from the scheme, which I think is in any case doubtful, he would quite reasonably in my view have tied the drop in value of his pension fund to the market shock caused by the pandemic. And as set out above, he was reassured on this point, and on the ongoing suitability of his portfolio, in the review of his pension. Quilter has further said that the complaint letter recorded Mr F as not wanting to take any investment risk. But what it actually said was that Mr F was an inexperienced investor and didn’t wish to take excessive investment risk. So Mr F wasn’t a “no risk” investor (as noted above, he was actually assigned a “Dynamic” risk profile, with the associated performance tolerances), and therefore wouldn’t have been expecting his fund value to inexorably rise. And there were no sustained periods of falls in the value of his investments which might have given him cause for concern about the viability of the transfer and future income withdrawals. Indeed, after the market shock caused by the pandemic, which Mr F might reasonably have been aware would have affected all investors with equity content in their pension funds, Mr F would then have witnessed the post pandemic recovery in the value of his investments. And so this wasn’t something which I think Mr F would reasonably have attributed to poor advice having been given to him as an individual. Rather, I think he would have appreciated

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that the downturn in performance was very much linked to global events, and the subsequent recovery, along with the reviews and comments about ongoing suitability, would have served to reassure him on that point. As such, I consider it to be quite plausible that Mr F only had cause for concern when he was contacted by his representative. And even if it could reasonably be concluded that he ought to have been aware of cause for concern by virtue of the annuity illustrations he received in 2022 and 2023, this was in any case within three years of Mr F raising his complaint.” Both parties were informed that this service would continue to consider the merits of the complaint. The investigator had already set out his assessment of the merits alongside his view on our jurisdiction. He said the following in summary: • These DBs would form a significant part of Mr F’s income in retirement, so there needed to be a significant chance of improving on those benefits to demonstrate that the transfer was in his best interests. Mr F was going to be taking on significant ‘at risk’ pension provision through the ongoing personal pension defined contribution (DC) plan so he didn’t need to sacrifice guaranteed benefits at this stage in his life and career into a risk environment, before needing to, if at all. • When looking at the potential suitability of the transfer, it was important to take into consideration COBS 19.1.6 which said the following|: “When advising a retail client who is, or is eligible to be, a member of a defined benefits occupational pension scheme or other scheme with safeguarded benefits whether to transfer, convert or opt-out, a firm should start by assuming that a transfer, conversion or opt-out will not be suitable. A firm should only then consider a transfer, conversion or opt-out to be suitable if it can clearly demonstrate, on contemporary evidence, that the transfer, conversion or opt-out is in the client's best interests.” • So, the starting point was to assume that the transfer was unsuitable, unless it could be clearly demonstrated that it was in Mr F’s best interest to transfer. • An important part of the supporting evidence was the Transfer Value Comparison (TVC). The content and calculation method of the TVC was prescribed by the FCA and was designed to demonstrate the cost of providing the same level of safeguarded benefits available from the scheme in a risk-free environment, should Mr F seek to replicate them in the open market. The TVC would then compare this figure with the transfer value on offer from the scheme. • As identified in both the TVC Mr F received and in the recommendation report, there was a significant gap between the risk-free value of the benefits Mr F was being advised to surrender, and the transfer value offered by the scheme, as follows: o Value of replacing the safeguarded benefits: £492,611 o Cash Equivalent Transfer Value (CETV) offered by the scheme: £323,759.56 (including Additional Voluntary Contributions) o Crystallised loss of value on transfer: £168,851.44

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• If a transfer was to be justified, there should be compelling reasons for a consumer to take such a significant reduction in the cash value of their benefits. There should also be a significant set of reasons to take that reduction at that point in time, rather than later when retirement intentions become clearer. • The advice was given after the regulator gave instructions in Final Guidance FG17/9 as to how businesses could calculate future 'discount rates' in loss assessments where a complaint about a past pension transfer was being upheld. Prior to October 2017, similar rates were published by this service on our website. Whilst Quilter wasn’t required to refer to these rates when giving advice on pension transfers, they provided a useful indication of what growth rates would have been considered reasonably achievable when the advice was given. • The closest discount rate to the time of this transfer was published for the period before 1 October 2017 and was 3.1% pa for five years to retirement at age 65. • The regulator's projection rates had also remained unchanged since 2014: the upper projection rate at the time was 8% pa, the middle projection rate 5% pa, and the lower projection rate was 2% pa. • The illustration for the Quilter Managed Fund used assumed rates of 1.9% pa at the low growth band, 4.9% pa for the mid band, and 7.9% pa at the high band. The fund management charge was 1.91% pa also and the ongoing advice charge was 0.5% pa. • The Critical Yield was 14.3% if the tax free cash lump sum was taken at age 65. This service would usually refer to the critical yield figure allowing for tax-free cash to be taken, as it was reasonable to assume that a person who would pay tax in retirement would want to minimise their tax liability. • This had been taken into account, along with the composition of assets used to determine the discount rate, Mr F’s attitude to risk and his term to retirement. And Mr F was likely to receive benefits of a materially lower overall value than the occupational scheme at retirement, as a result of investing in line with that attitude to risk. • For a transfer to be financially viable, the assets Mr F’s attitude to risk allowed them to invest in shouldn’t just have been capable of achieving the critical yield but exceeding it. There would usually be no point giving up the guarantees of the DB scheme simply to ‘stand still’, given the risk that the transfer might underperform. • The closer Mr F got to retirement, the more that differential would need to be – even up to a couple of percent pa for someone very close to retirement. • Given the transfer of risks from a DB scheme to a customer following the transfer of pension benefits, a much higher margin of expecting to improve upon the scheme benefits would have been required without there being specific and personal retirement objectives which couldn’t have been achieved by remaining in the DB scheme. • Having reviewed the choice of funds recommended, the mix was appropriate for a moderate risk investor who could demonstrate some capacity for loss, which was appropriate for Mr F. It was common, though, for people’s risk attitude to reduce as they approached retirement as they become more reliant on their pension savings

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and lack the income and or other assets to recoup losses if investment returns are poor. • Whilst a medium risk investor might, based on the regulator’s projections, maintain the scheme benefits, this would be with the additional risks which would be avoided by remaining in the scheme. There appeared to be little point in taking greater risk to achieve broadly similar benefits. Furthermore, the recommendation assumed that Mr F would be prepared to accept risk into his 60s,70s,80s etc. • It must also be taken into consideration that Mr F would be exposed to some risk through his current workplace pension and DC scheme, and it wouldn’t therefore be a good idea to put all of his future pension provision at the same risk. • Simply put, there was no compelling need to take on this additional risk at the time and instead Mr F could have deferred making any decision of whether to transfer these guaranteed benefits until nearer retirement. This would also have meant that Mr and Mrs F would have been in a much better position to know what their expected income and outgoings needs from age 65 onwards would be. • Financial viability wasn’t the only factor to consider when giving advice and so consideration had been given to whether there were other reasons to indicate that transferring was suitable for Mr F. • Flexibility, control and the potential for early retirement available through a personal pension likely would have seemed attractive to Mr F, but Quilter’s role wasn’t to simply transact the course of action Mr F may have felt he wanted. The adviser’s role was to understand what would be in his best interests and make a recommendation on this basis. • By transferring at that time, he would subject himself to an extended period of exposure to investment risk when he could benefit from increases in his deferred pension. This was a valuable benefit of remaining in a defined benefit scheme and this should have been explained in greater detail to ensure that he was fully aware. • By remaining in his DB scheme, Mr F would have retained valuable safeguarded benefits that could provide a low-risk foundation to his retirement income. And Mr F would be taking investment risk with his DC pension plans. • Such a situation would provide a mixture of safeguarded benefits with the flexibility of pension freedoms through the built-up benefits in his personal pension plans. Mr F also had death in service benefits through his employment and so, in the event of his death, his family would receive substantial benefits. • Whether in good health and expecting to have a long retirement, or in the event of premature death or serious ill-health, by retaining his DBs Mr F would have a broad range of benefits up to the time of his retirement, which could reasonably have been up to eight years into the future. • Retaining those benefits would most likely mean that any future transfer value would be less than the offer that was being made at the time, however any argument or worries that transfer values may fall could have been more than rationally countered with the lack of running costs and the guaranteed growth within his DB scheme, had this been explained in a balanced way.

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• The lump sum death benefits under the DB scheme were also considered inferior to a personal pension plan where the option of taking the whole residual fund as a lump sum was preferred. But Mr F had no health issues which would mean that death benefits, or any likelihood to not benefit from a pension income derived of the scheme for a reasonable amount of time, were of concern at that point. • Pension provision was intended to provide for an individual’s retirement, and this was almost the entirety of Mr F’s provision at the time of his advice. The recommendation needed to be given in the context of Mr F’s best interests. Unless the financial needs of the individual concerned were given prominence over the provision of death benefits, this couldn’t be said to be acting in that individual’s best interests. • Any desire in relation to the provision of death benefits shouldn’t have overridden Mr F’s own personal requirement to benefit from his pension. This objective to provide more flexible death benefits should have been properly weighed against the guaranteed benefits Mr F was relinquishing, and the adviser should have advised him that his own financial benefit took priority here. • Mrs F was 48 and therefore the spouse’s benefits, rising at 5% pa, would have provided a strong income foundation should Mr F have predeceased her. The available evidence didn’t support the position that Mrs F was experienced in investing, nor would there have been any benefit to Mrs F in facing increased insecurity by way of the risk of her inherited pension benefits running out or being eroded by charges. • The proposed transfer could have increased the amount of tax-free cash, but this could also have decreased between the transfer and accessing the tax free cash. The risk to Mr F’s retirement provision outweighed the benefit for potentially increased tax free cash which could be used to repay his mortgage. This would in any case have been possible with his DB scheme, but he was also paying down his mortgage comfortably. • Had Mr F been suitably advised to retain his DBs, he would have retained valuable safeguarded benefits that could provide a low-risk foundation to his retirement income and coupled with his DC benefits, could have provided a healthy mix of risk and reward appropriate for an inexperienced investor looking for professional balanced advice. • The report did explicitly list the advantages and disadvantages of transferring, including various risk warnings. However, disclosing product features and the risks wouldn’t render unsuitable advice suitable. • Properly informed, suitably advised individuals should be able to decide for themselves if they wanted to transfer their safeguarded benefits. The problem here was that this was a complex matter involving many factors with which Mr F, as a retail client, wouldn’t have been familiar – hence his reliance on a professional party to take those factors into account and provide suitable, balanced advice. • Had Mr F retained his DBs, he could have deferred any decision to transfer to an alternative arrangement for flexibility until a time much closer to the scheme’s normal unreduced retirement age when his situation would be clearer, and his attitudes might be very different. At that time, he would be in a better position to know whether flexibility of income and improved tax-free cash were more valuable to him than a guaranteed income for life.

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• In the meantime, he had (not including his other DB scheme income or transfer value added to his SIPP) around £120,000 to use which was more than sufficient to cover the projected £900 net per month income shortfall. By retaining his DBs from this scheme, he would have risk free and rising income which, coupled with either his other scheme benefits and/or personal pension would have provided a much safer and diversified income in retirement. • Once Mr F started receiving his state pension, that would have potentially also alleviated the need to draw on his personal pension, thereby both leaving tax efficient funds to grow but this this would take into account the unknowns of expenditure in retirement by the time his wife, who was 11 years younger than Mr F, was to retire. • There was simply no need for Mr F to take on the investment risk associated with transferring, and as noted he would have benefitted from increases in deferment had he simply either used his personal pension (with other scheme income or transfer value added to his personal pension) up to age 65. • Although the increases to his DBs were capped, there wouldn’t have been a reduction in these benefits (unless he elected to take the scheme benefits earlier than his normal retirement age). However, if Mr F transferred out there was a distinct possibility of a reduction in his pension fund value. • Having more control over income levels, having the option of paying off his mortgage and the potential for a bigger legacy for his family were very emotive desires that, on balance, would appeal to most people, but the adviser’s role was to be the professional, looking critically at the objectives and giving the best advice based on the circumstances at the time of the advice. • This would have demonstrated that recommending a transfer for these reasons wasn’t an appropriate recommendation as the true costs of the decision hadn’t been fully quantified. Further, had the advice been to not transfer and to either take the benefits at age 60 and use his other pensions to supplement income shortfall until the state pension in six years’ time, or alternatively, defer making a decision until the normal age at which he could access his unreduced DBs, he could then have explored whether transferring would be beneficial or not when he would be in a more realistic position. • By this point, Mr F would have had the benefit of experiencing five years of working for himself and seeing if his income plans panned out. Mrs F would also be in her mid-50s and may have wanted to consider stopping work herself and enjoy retirement with her husband. • Also given that Mr F’s initial established shortfall in retirement was £900 pm (or £10,800 pa), the preserved pension income if Mr F retired at 60 from the scheme was £11,800 (without TFC) and the suitability reports notes that he didn’t need to access the tax free cash. • Further, it didn’t appear to be the case that Mr F firmly wanted to leave his employer at age 60, because he remained with it until March 2021. • Overall, Quilter hadn’t demonstrated that there was a compelling need which meant transferring was in Mr F’s best interests. It hadn’t justified the guaranteed, risk-free benefits being given up.

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• The advice given to Mr F wasn’t suitable. He was relinquishing a guaranteed, risk- free, and increasing income and, by transferring, Mr F was very likely to obtain lower retirement benefits, and there were no other pressing reasons which would justify a transfer and outweigh this. Mr F shouldn’t have been advised to transfer out of the scheme just to gain some short-term flexibility. This wasn’t worth giving up the guarantees associated with his DB scheme. • As the complaint should be upheld on the basis that the recommendation to transfer out of the DB scheme was unsuitable. the suitability of the investment recommendation didn’t need to be considered. The investment only existed by virtue of the unsuitable recommendation. • In terms of putting things right, a fair and reasonable outcome would be for Quilter to put Mr F, as far as possible, into the position he would now be in but for the unsuitable advice. Mr F would have most likely remained in the occupational pension scheme if suitable advice had been given. • Quilter should therefore 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. • Compensation should be based on the scheme’s normal retirement age which was age 65 as per the usual assumptions in the FCA's guidance. • The 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 Mr F’s acceptance of the decision. • If the redress calculation demonstrated a loss, as explained in policy statement PS22/13 and set out in DISP App 4, Quilter should: o always calculate and offer Mr F redress as a cash lump sum payment, o explain to Mr F before starting the redress calculation that: - the 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 his redress prudently is to use it to augment his DC Pension o offer to calculate how much of any redress Mr F receives could be augmented rather than receiving it all as a cash lump sum, o if Mr F accepted Quilter’s offer to calculate how much of its redress could be augmented, request the necessary information, and not charge Mr F for the calculation, even if he ultimately decided not to have any of the redress augmented, and o take a prudent approach when calculating how much redress could be augmented, given the inherent uncertainty around Mr F’s end of year tax position.

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• Redress paid to Mr F as a cash lump sum would be treated as income for tax purposes. So, in line with DISP App 4, Quilter may make a notional deduction to cash lump sum payments to take account of tax that Mr F would otherwise pay on income from his pension. • Typically, 25% of the loss could have been taken as tax-free cash and 75% would have been taxed according to Mr F’s likely income tax rate in retirement – presumed to be 20%. So, making a notional deduction of 15% overall from the loss would adequately reflect this. • The impact on Mr F of the unsuitable advice and transfer had also been considered. Given Mr F’s age, circumstances and the substantial amount he’d built up in his pension to that date, along with the fact that this DB pension would have been a very substantial part of his overall pension entitlement, the thought of losing benefits would have negatively impacted Mr F. In recognition of this, Quilter should pay Mr F £300 for any distress and inconvenience the transfer had caused. Quilter disagreed, however, saying the following in summary: • It acknowledged that Mr F was taking on risk with the transfer, but he considered this was a risk worth taking to achieve his objectives. Putting all of his pension provision in a DC environment allowed Mr F to meet his objectives. • The primary driver for the transfer was the need for flexibility, which was highlighted repeatedly in the 2017 Suitability Report. Mr F’s actions since the transfer further supported this, including the ad hoc withdrawals made in 2020 and 2023, and the increase to his income in 2023. These demonstrated that flexibility was an important consideration, given that Mr F had exercised this on multiple occasions. A “risk of ruin” report was also completed at each advice point. • It wasn’t accepted that the recommendation wasn’t financially viable due to the analysis provided in 2017. The new arrangement was deemed sufficient to meet Mr F’s income needs, and Mr F was advised that, if he took too much income, this would directly impact the sustainability of the Quilter pension. • The investigator had said that the transfer allowed Mr F to benefit from an increased tax free lump sum, but that equally the value could have reduced prior to the transfer so that the tax free cash was lower. However, as the CETV was guaranteed and the transfer was made in time, this was a moot point. • It also wasn’t accepted that Mr F could have waited to consider transferring his pension later when his pension needs were clearer. This conclusion was justified by the fact that Mr F would have lost out on the enhanced CETV which he considered to be beneficial. • These additional points had been raised because the CETV and the increased tax free lump sum were a clear motivator for Mr F at the material time, given his desire to grow his self-employed business. • The investigator had remarked by way of a final observation that it didn’t appear that Mr F had a firm intention to leave his employer at age 60 as he remained with it until March 2021. But this conclusion had been reached with the benefit of hindsight. Its adviser could only advise on the circumstances as presented to them in 2017, which

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were fully disclosed in the 2017 Suitability Report, and not contested by Mr F at any time. • The transfer recommendation was therefore suitable and in keeping with the Mr F’s needs and objectives. It was evident that he proceeded in a fully informed position, aware of the risks, and the safeguarded benefits he was giving up. 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. When considering what’s fair and reasonable, and in accordance with the Financial Services and Markets Act 2000 (FSMA) and DISP, I need to take into account relevant: law and regulations; regulators’ rules, guidance and standards, and codes of practice; and, where appropriate, what I consider to have been good industry practice at the time. The below isn’t a comprehensive list of the guidance, rules and regulations which applied in 2015, but provides useful context for my assessment of the business' actions here. Within the FCA’s handbook, COBS 2.1.1R required a regulated business to “act honestly, fairly and professionally in accordance with the best interests of its client”. The FCA’s suitability rules and guidance that applied at the time Quilter advised Mr F were set out in COBS 9. The purpose of the rules and guidance is to ensure that regulated businesses, like Quilter, take reasonable steps to provide advice that is suitable for their clients’ needs and to ensure they’re not inappropriately exposed to a level of risk beyond their investment objective and risk profile. In order to ensure this was the case, and in line with the requirements COBS 9.2.2R, Quilter needed to gather the necessary information for it to be confident that its advice met Mr F’s objectives and that it was suitable. Broadly speaking, this section sets out the requirement for a regulated advisory business to undertake a “fact find” process. There were also specific requirements and guidance relating to transfers from defined benefit schemes – these were contained in COBS 19.1. COBS 19.1.2R required the following: “A firm must: (1) compare the benefits likely (on reasonable assumptions) to be paid under a defined benefits pension scheme or other pension scheme with safeguarded benefits with the benefits afforded by a personal pension scheme, stakeholder pension scheme or other pension scheme with flexible benefits, before it advises a retail client to transfer out of a defined benefits scheme or other pension scheme with safeguarded benefits; (2) ensure that that comparison includes enough information for the client to be able to make an informed decision; (3) give the client a copy of the comparison, drawing the client’s attention to the factors that do and do not support the firm's advice, in good time, and in any case no later than when the key features document is provided; and (4) take reasonable steps to ensure that the client understands the firm’s comparison and its advice.”

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Under the heading “Suitability”, COBS 19.1.6 set out the following: “When advising a retail client who is, or is eligible to be, a member of a defined benefits occupational pension scheme or other scheme with safeguarded benefits whether to transfer, convert or opt-out, a firm should start by assuming that a transfer, conversion or opt-out will not be suitable. A firm should only then consider a transfer, conversion or opt-out to be suitable if it can clearly demonstrate, on contemporary evidence, that the transfer, conversion or opt-out is in the client's best interests.” COBS 19.1.7 also said: “When a firm advises a retail client on a pension transfer, pension conversion or pension opt-out, it should consider the client’s attitude to risk including, where relevant, in relation to the rate of investment growth that would have to be achieved to replicate the benefits being given up.” And COBS 19.1.8 set out that: “When a firm prepares a suitability report it should include: (1) a summary of the advantages and disadvantages of its personal recommendation; (2) an analysis of the financial implications (if the recommendation is to opt-out); and (3) a summary of any other material information.” I’ve therefore considered the suitability of Quilter’s advice to Mr F in the context of the above requirements and guidance, and would comment as follows. Quilter obtained a transfer report for comparison purposes to determine the viability of the transfer to meet Mr F’s objectives from a financial perspective. As set out by the investigator, the suitability report was issued after the FCA’s revised guidance which was released in late October 2017, and which provided “discount rates” for levels of growth which were deemed achievable for particular time periods until prospective retirement. But even before that, similar rates were published by this service. The discount rate deemed achievable for the number of years left to the scheme retirement age of 65 was 3.1% pa. And the low, mid and high band growth rates set out by the regulator were 2%, 5% and 8% respectively. The critical yield to age 65, at 14.3%, if tax free cash was taken, therefore comfortably exceeded both the discount (or growth) rate deemed achievable, and even the high growth rate used by the regulator. And it’s worth noting that Mr F was recorded in the suitability report as being happy with modest returns and that he didn’t want to take an aggressive approach to investing. Therefore, if his pension funds were invested in line with his risk rating, I think it’s more likely than not that Mr F would receive pension benefits of a lower overall value than those he’d have been entitled to under the scheme by transferring. And this was borne out by the cost of replacing the safeguarded benefits being £492,611, compared to the CETV being offered of £323,759 - a shortfall of some 34%.

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And so, I don’t think that the transfer could reasonably be deemed to be either viable, or suitable, from a purely financial perspective. In terms of other objectives which might have justified the transfer, as set out in the suitability reports, Mr F had approached Quilter to determine how he could achieve his required income of £1,500 net pm, using the pension benefits available to him and the earned income from his part time self-employment. And Quilter duly set out in the suitability report how Mr F could achieve this objective by transferring and implementing flexi draw down. But Mr F could also quite feasibly have achieved this immediately without needing to transfer, and even without the need to access his DBs with the other scheme (which had a CETV of £68,000). The scheme was offering him a tax free cash amount of around £45,000, with which Mr F could have repaid his remaining mortgage, or alternatively, as this didn’t seem to be pressing, used on other things (such as his business) or reinvested. The scheme would then pay a residual income of £6,712 pa. To achieve a net monthly income of £1,500, an individual would need to earn a gross amount of around £20,500. But Mr F also netted £600 pm from his self employment and had access to £120,000 of DC pension benefits, which he could have used to draw down the shortfall until the state pension began in six years’ time. If I’m then to factor in the other DBs (transferred or otherwise), Mr F would have been comfortably able to achieve his goal of £1,500 pm net from age 60 onwards, with a likely surplus, without needing to transfer these scheme benefits. But I can’t see that this option, which would have enabled him to retain his guaranteed benefits, was set out to Mr F. Flexibility of income was cited as being a key driver here, with Mr F being recorded as not wanting a fixed income, preferring the facility to adjust his income as his circumstances dictated. But even if I accept this as being the case, had Mr F not transferred these DBs, he would have had a reasonable “hybrid” of guaranteed benefits and drawn down income, with which he could in any case flex his annual income. And any surplus could have been reinvested as he saw fit. By contrast, through transferring Mr F exposed all of his pension funds to investment risk, and relinquished all guarantees of income until his state pension began in six years’ time. The investigator observed that financial advice isn’t simply concerned with wish fulfilment – and I agree. Mr F may have found the prospect of flexibility of income appealing, but it was the responsibility of Quilter to explore alternatives to this which would mean that Mr F could retain at least some of his defined benefits and provide a guaranteed basic income. And so I’m not persuaded that Mr F needed, or ought to have been advised to implement, the flexibility of income which would be provided by the transferred funds in retirement, when compared against the benefits of the guaranteed escalating income which he would receive from the scheme – especially when he in any case had the ability to flex his income with his DC benefits. And the loss of benefits though transferring, as set out above, in cash terms was significant. In terms of the alternative lump sum death benefits a transfer offered to his family, as noted by the investigator, the priority here was to advise Mr F about what was best for his retirement. And the existing scheme offered death benefits, by way of a spouse’s pension, which would have been valuable to Mrs F in the event of his death. And Mr F had no particular health issues which might have made the option of a lump sum, rather than a spouse’s annuity, more appealing.

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Further, whilst the CETV figure would no doubt have appeared attractive as a potential lump sum, the sum remaining on death following a transfer was always likely to be different. As well as being dependent on investment performance, it would have also been reduced by any income Mr F drew in his lifetime. And if there really was a need for an (albeit undefined) lump sum for Mrs F in the event of Mr F’s death, rather than a guaranteed income for the rest of her life, then this could have been addressed through discussions around life cover. I’ve then thought about whether, if suitably advised, Mr F would still have proceeded with the transfer. Mr F opted out of the scheme in July 2017, seemingly after discussions with colleagues and without being advised to do so by Quilter. This is an important consideration, as I need to determine, on balance, whether this is indicative of Mr F more likely than not still transferring his pension benefits, even if Quilter had advised against it. But in thinking about this, Mr F intended at the time to finish work with his employer when he turned 60. And so, opting out of the scheme may not have seemed to have quite the associated intent to transfer as might perhaps be present with an individual who intended to still carry on working for the same employer. Rather, I think this might quite plausibly have been a case of Mr F creating a “post-employment” environment of options for himself. And I think if the total loss of income guarantees had been fully explained (with the associated ramifications for income security), along with a straightforward strategy of retaining some guarantees but still being able to flex his income – and more importantly, had this been recommended as a suitable alternative by the professional here – I think it’s more likely than not that Mr F would have opted for this. Overall, therefore, for the reasons given I’m not satisfied that it was clearly in Mr F’s best interests, as required by the rules, to relinquish his DBs and transfer them. And for the reasons given above, I also haven’t seen anything to persuade me that Mr F would have insisted on transferring, against advice, to remain in the defined benefit scheme. So, as with the investigator, I’m upholding the complaint as I think the advice Mr F received from Quilter was unsuitable. Putting things right A fair and reasonable outcome would be for Quilter Financial Services Limited to put Mr F, as far as possible, into the position he would now be in but for the unsuitable advice. Quilter Financial Services Limited should therefore 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. The 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 Mr F’s acceptance of the decision. Compensation should be based on the scheme’s normal retirement age which was age 65 as per the usual assumptions in the FCA's guidance.

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If the redress calculation demonstrates a loss, as explained in policy statement PS22/13 and set out in DISP App 4, Quilter Financial Services Limited should: o calculate and offer Mr F redress as a cash lump sum payment, o explain to Mr F before starting the redress calculation that: - the 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 his redress prudently is to use it to augment his DC Pension o offer to calculate how much of any redress Mr F receives could be augmented rather than receiving it all as a cash lump sum, o if Mr F accepts Quilter Financial Services Limited’s offer to calculate how much of its redress could be augmented, request the necessary information, and not charge Mr F for the calculation, even if he ultimately decides not to have any of the redress augmented, and o take a prudent approach when calculating how much redress could be augmented, given the inherent uncertainty around Mr F’s end of year tax position. Redress paid to Mr F as a cash lump sum would be treated as income for tax purposes. So, in line with DISP App 4, Quilter Financial Services Limited may make a notional deduction to cash lump sum payments to take account of tax that Mr F would otherwise pay on income from his pension. Typically, 25% of the loss could have been taken as tax-free cash and 75% would have been taxed according to Mr F’s likely income tax rate in retirement – presumed to be 20%. So, making a notional deduction of 15% overall from the loss would adequately reflect this. As with the investigator, I’ve also considered the impact of this matter on Mr F. And I agree that, given Mr F’s age, circumstances and the substantial amount he’d built up in his pension to that date, along with the fact that this DB pension would have been a very substantial part of his overall pension entitlement, the thought of having lost out on pension benefits would have caused him concern and distress. Our website sets out guidance on the type of award this service might make in similar situations. It says that an award between £100 and up to £300 might be suitable where there have been repeated small errors, or a larger single mistake, requiring a reasonable amount of effort to sort out. These might typically result in an impact that lasts a few days, or even weeks, and cause either some distress, inconvenience, disappointment or loss of expectation. I think this is a fair reflection, in terms of the larger single mistake, of what’s happened here and the likely impact on Mr F. And so, Quilter Financial Services Limited should also pay Mr F £300. My final decision My final decision is that I uphold the complaint and direct Quilter Financial Services Limited

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to undertake the above. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr F to accept or reject my decision before 22 May 2026. Philip Miller Ombudsman

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