The Financial Conduct Authority has fined a financial advice firm almost a million pounds after they improperly pushed hundreds of pensioners to ditch their defined benefit (DB) scheme.
The advice firm, Inspirational Financial Management, provided “unsuitable pension transfer advice” between 2015 and 2017 as they only collected fees if the pensioners transferred schemes.
The FCA said that 83 per cent of the firm’s pension transfer advice “failed to comply with its minimum required standards, and customers risked financial loss as a result of the poor advice they received”.
Out of the 307 customers that they advised to transfer out of their DB pension scheme, 261 followed through, including 198 members of the British Steel Pension Scheme, with their pension benefits collectively totalling over £90m.
“Customers transferring out of the BSPS were already in a vulnerable position due to the uncertainty surrounding the future of their pension scheme, so it was critical that they received good advice,” the FCA said.
Meanwhile, director William Hofstetter and adviser Arthur Cobill have both been banned from advising customers on pension transfers and pension opt outs, with Hofstetter also being banned from holding any senior management function at any regulated firm. Cobill advised 245 of the customers that transferred out of their DB scheme.
Cobill and Hofstetter will also be paying £120,000 and £40,000 respectively to the Financial Services Compensation Scheme (FSCS) to contribute to compensation for IFM’s customers.
IFM went into administration in November last year, with the FCA saying it will give preference to creditors ahead of the £897,840 penalty on the firm.
Therese Chambers, joint executive director of enforcement and market oversight at the FCA, said: “Pensions are the safety net people spend their lives building. For many customers, their DB pension was their most valuable asset, and it was their only retirement provision other than their state pension.
“As experienced advisers, Mr Cobill and Mr Hofstetter, and IFM should have known better than to unravel this.
“It is only right that Mr Cobill and Mr Hofstetter contribute towards compensating those affected.”