St. James's Place Wealth Management Plc · DRN-5685254

The complaint Mr V complains that St. James’s Place Wealth Management Plc (‘SJP’) gave him unsuitable pension and ISA investment advice, which has led to him being financially disadvantaged. He also complains that he didn’t receive all of the annual reviews he was paying ongoing advice fees for. What happened The details of this complaint are well known to both parties, so I won’t repeat everything again here. The following is a summary of the key background and events leading up to the complaint to provide some context. Where necessary, I will refer to specific evidence or expand on what follows in support of my findings in the section below. Mr V held a personal pension with SJP, which appears to have started in 1995. Mr V was making regular contributions to the pension, which in 1999, SJP recommended he increase and convert to an employer contribution through a salary sacrifice arrangement. This was Mr V’s active pension plan. In 2001, SJP recommended Mr V transfer an existing personal pension held with another provider to his current SJP pension. The pension in question was a contribution from a wound-up company scheme from several years ago. It was recorded that Mr V was unhappy with the poor performance of his pension and the narrow fund management focus. Mr V’s attitude to risk was deemed ‘speculative’ and SJP recommended the transferred funds be invested in a spread of five managed funds. In 2007, SJP recommended Mr V move his existing SJP pension and another pension held with a different provider, to a capped drawdown plan. The reason for the recommendation was to cater for a recent change in Mr V’s personal circumstances – he’d recently divorced and just become self-employed. Mr V’s objective was to access a lump sum of around £35,000, so he could pay off part of his mortgage to reduce his outgoings, and to provide working capital for his newly established business. He also wanted an income of around £5,000 a year for two years to subsidise his earned income while he established his business. Mr V’s attitude to risk was deemed ‘medium.’ SJP recommended he invest the two years’ income requirement in deposit funds with the residual balance invested in a spread of six managed funds. In 2019, SJP recommended Mr V switch to a flexi-access drawdown arrangement through his existing plan or Retirement Account. Mr V had an immediate need for a lump sum of £15,000 to repay an outstanding business loan, while at the same time drawing a regular income of around £3,800 a year. Because Mr V’s existing capped drawdown plan limited the amount of income he could take, his need couldn’t be met from the existing arrangement. Mr V also had no other assets to raise such a lump sum, so his Retirement Account was converted to flexi-access drawdown to meet his objective. The suitability report noted there would be no change in the charges that applied to his funds under his plan. Mr V was 65 at this time. It was noted that, while the impact of the withdrawal was his pension funds were projected to run out at age 88 based on a low growth rate assumption, Mr V was due to receive his state pension the next year, so

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he would be less dependent on his SJP pension, and this would make up for any shortfall. In May 2024, Mr V complained to SJP using the services of a professional representative, raising the broad issues I noted at the start. SJP didn’t provide a final response to the complaint, so Mr V referred his complaint to us. One of our Investigators considered the matter, and they didn’t uphold the complaint. In summary they ultimately concluded the following: • There wasn’t anything to show Mr V had an ISA. SJP’s records only show Mr V received the proceeds of an ISA held by a relative when they died. • There is limited information about the pension transfer advice in 2001. What information there is, doesn’t suggest the transfer was unsuitable. The transfer was to Mr V’s existing SJP pension, which was receiving employer contributions, there was wider fund choice, and there was outperformance potential. • The 2007 pension transfer advice and recommended drawdown arrangement was suitable. They thought Mr V’s circumstances at the time meant he had no alternative but to use his pension as his only main available asset to meet his objective. His circumstances meant he needed to establish his business, reduce his outgoings and to have an income in the short term to help support him during this transition. While the charges were higher, these were clearly explained and Mr V didn’t have a choice. Borrowing the money wasn’t an option. • In terms of annual reviews – the advice Mr V received was given pre–Retail Distribution Review (RDR) which meant there was no requirement for SJP to provide an ongoing review service, albeit he did generally receive regular reviews. The advice in 2019 to move to flex-access drawdown did not attract ongoing advice charges and was an extension of the original advice meaning the Retirement Account remained a pre RDR contract. So, there was no requirement to provide ongoing reviews. Mr V, through his representative disagreed with the conclusions reached about the pension transfer advice and ongoing reviews. He ultimately accepted the position on the ISA given the lack of available documentation. In summary his primary concern relates to the advice given in 2007. He said full and accurate information wasn’t obtained about his circumstances, and all other options available to weren’t explored first. For example, he could have been advised to take on additional work. Drawdown wasn’t an appropriate option for him. This was facilitated without explaining the impact, and SJP didn’t check his income and expenditure needs. He said it also failed to consider an annuity. He said the SJP pension was only in place because of the previous poor advice to transfer an existing pension to it. He said a medium attitude to risk wasn’t appropriate at this time – his capacity for loss was low and he was facing an income shortfall in retirement. He said the advice to switch from capped drawdown to flexi-access drawdown was a new product and so triggered the requirement for ongoing reviews. And he says there is evidence of SJP agreeing to ongoing reviews in 2021. Because SJP failed to provide all reviews, he says he should be compensated. Because the Investigator wasn’t persuaded to change their opinion, the complaint was passed to me to decide.

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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, regulatory rules, guidance and standards, codes of practice, and (where appropriate) what I consider to have been good industry practice at the relevant time. And where the evidence is incomplete or inconclusive I’ve reached my decision based on the balance of probabilities – in other words, on what I think is more likely than not to have happened, given the available evidence and wider circumstances. Having considered all of this and the evidence in this case, I agree with the conclusions reached by the Investigator for the following reasons. Pension switch advice in 2001 As the Investigator explained, there is limited information about the advice given here. Perhaps unsurprising given how long-ago things happened. I’ve been provided with a suitability letter and a transfer value application form. Based on what I have seen, there isn’t anything to show Mr V lost any guaranteed benefits by transferring, such as a guaranteed annuity rate or the right to take benefits at an earlier than normal retirement age. The pension in question was based on a contribution from a wound-up company scheme from around 1989, so Mr V wasn’t losing any ongoing employer contributions. Mr V was transferring to his existing SJP pension. This did not exist simply because of the transfer. Mr V’s SJP pension was active and receiving contributions – employer deemed contributions from 1999. So, consolidating into a current active existing pension with whom Mr V already had an existing relationship of several years, was not, in my view, unreasonable at the time. Making a comparison of the charges of the old pension with the new one is difficult here – there’s simply not enough available information. I am satisfied that SJP disclosed the charges of the SJP plan – the early encashment charge of 6% in year, reducing to 1% in year six and zero thereafter, the annual management charge of 1.25%, and the cost of managing and maintaining the investments at 0.25% a year. The suitability letter also referred Mr V to an illustration and key features document, where this cost information was detailed. Mr V ought to have already been familiar with these charges given he’d had his SJP pension plan since 1995. From what is available, it’s possible the SJP pension was slightly more expensive than Mr V’s old pension. This is because there is reference to the SJP pension needing to outperform the old one by 0.2% a year. And I accept cost is an important consideration – it was something the regulator, The Financial Services Authority at the time, referred to in their pension switching checklist in 2009 following their earlier report into the quality of pension switching advice, as an example of where consumers had lost out. But in this case, the outperformance required was, in my view, relatively low at 0.2% a year. Mr V’s reason for transferring was because he considered the performance of his existing plan was poor. I’ve not seen evidence to support that. But, based on the relatively low outperformance required, the 18-year investment term to Mr V’s retirement age of 65, his deemed speculative attitude to risk and investment recommendation (not unreasonable in my view given his age and term to retirement, albeit the recommended managed funds might now be considered to be a more medium or balanced risk approach) together with the

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regulator’s assumed mid and upper growth rates of 7% and 9% respectively, I think there was potential for Mr V to be better off as a result of transferring. Which is the primary reason for considering a transfer. Taking all of the above into account, I’ve not seen enough here to fairly and reasonably conclude the transfer was unsuitable or not in Mr V’s best interests. Pension switch and drawdown advice in 2007 As I said above, at this time SJP recommended Mr V move his existing SJP pension and another pension held with a different provider, to a capped drawdown plan to enable him to access a lump sum for two key purposes and to provide him with an income to subsidise his earned income. I think Mr V’s circumstances are key here as to why I think, on balance, the advice was suitable. It’s apparent that Mr V had recently gone through a significant change in his circumstances. He’d recently divorced, ceased being employed and started his own business. There doesn’t appear to have been much room within his monthly income and expenditure budget – he had no real surplus income to speak of once his essential expenditure and relatively small discretionary spend of £300 was taken into account. So, Mr V’s objective of wanting to access a lump sum to part repay his mortgage to help reduce his outgoings, inject some capital into his business, and draw a supplementary income in the short-term while he grew his business, in my view, seems reasonable. I accept it appears Mr V was currently managing his mortgage repayments. But reducing the balance to provide him with some headroom, in his particular circumstances, was, in my view, fair and reasonable. Mr V’s outstanding mortgage at around £140,000, was significant in relation to his current expected annual income, so reducing the debt and its sensitivity to potential further interest rate increases, putting increased pressure on his monthly outgoings was in his particular circumstances reasonable. Mr V was advised to use his combined pension funds to meet his objective. And I accept it appears the alternatives that might have been available to him don’t appear to have been explored with him in any depth. But Mr V had no real assets to use or realise – he had a few thousand pounds in total in cash and ISA savings. As I’ve already said, he had no real surplus income to support borrowing the amount of money he needed. And I think borrowing in any event was unlikely to have been a viable option. Mr V had only recently started his business and so wouldn’t have much by way of a self-employed income track record typically required by lenders to demonstrate affordability and suitability of lending. I also think Mr V’s outstanding mortgage would likely have impacted his ability to take on any additional borrowing at this time – this was quite a significant debt to service on his own. So, Mr V’s only real available asset to use to meet his objective was his pension funds. I accept accessing pension monies before normal retirement age should be seen as a last resort and would only be suitable in limited circumstances. But I think it was suitable in Mr V’s case. I can see Mr V’s representative has said if his business were to fail, it’s likely he would have no income and no pension. But Mr V wasn’t using all of his pension funds. And the purpose of accessing his pension was to support his business to help reduce the risk of failure and facilitate being able to sustainably support himself financially following the significant change in his circumstances. Based on the advice, the plan was that Mr V only needed an income for two years and then he could restart contributions. And with around 12 years to his expected retirement date, he still had time and the potential to make further contributions to his pension, and it still had

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ample time to grow. I accept there is no evidence that SJP explored Mr V’s income and expenditure needs in retirement to determine the extent to which accessing his funds now would impact things later on. And it ought to have done. But I think it’s unlikely Mr V would have been in a position to accurately determine his needs at this time, particularly given his recent change in circumstances. And I can see that SJP told Mr V in the recommendation letter that by accessing his funds he was reducing the potential benefits that his funds would provide when he decided to retire. So, I think Mr V ought reasonably to have understood this principal, if not the detail. But ultimately, given Mr V’s limited options, I don’t think the advice, in his specific circumstances, was unsuitable. Or that Mr V would likely have acted differently if SJP had been clearer about things. It allowed him to ease his financial commitments, provide working capital for his business to give him the potential to generate a sustainable future income, and provide support in the short term by way of a supplementary income. This also means that, in my view, a drawdown plan was suitable. It provided Mr V with the flexibility he needed – accessing a lump sum with the ability to only draw an income in the short term – which alternatives such as an annuity, could not provide. The drawdown plan was inevitably more expensive – 1.775% more each year than Mr V’s existing arrangements. But the recommendation letter made this clear and that it would reduce the growth on his funds. It also said Mr V’s existing arrangements couldn’t support drawdown. So, given his need and his particular circumstances as I have described, I don’t think the increase in cost made the recommendation unsuitable. Mr V’s attitude to risk was deemed to be ‘medium’ – 3 on a scale of 1 to 5. I accept on the one hand that Mr V’s circumstances meant his capacity for loss was low. But on the other hand, adopting a more cautious approach might limit the ability for his pension to grow over the period to his expected retirement. The term to retirement was still reasonable at 12 years, so I don’t think adopting this level of risk with the recommended investment strategy was inappropriate or unsuitable at the time. And I can see the recommendation, rightly in my view, placed Mr V’s two years’ income need in deposit funds to protect him from accessing funds in times of falling market performance. So, taking all of the above into account, I think the recommendation to consolidate his pension monies to meet his stated objective was, in his specific circumstances at the time, suitable. I don’t think SJP did anything substantially wrong here. Ongoing advice reviews The two key pieces of pension transfer advice Mr V received happened prior to what is called the Retail Distribution Review (RDR), which from the start of 2013 changed the rules about the way advising firms, like SJP, were paid. Prior to the RDR, investment advice was paid by way of commission through an arrangement with the product provider and the advising firm. This typically took the form of an initial commission based on a percentage of the invested funds, and an ongoing regular, or trail commission. The trail commission payments (effectively bundled into the overall cost or charge for the product / investment via the annual management charge) were designed to pay the adviser to carry out any ongoing services. But importantly, the firm was under no obligation to do so to earn the commission. From the start of 2013, payments for investment advice had to be arranged and paid separately as a fee between the adviser and the consumer. But advisers could continue to receive trail commission for products sold prior to that date.

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So, in Mr V’s case, SJP was not obliged to provide him with regular ongoing reviews. And I haven’t seen any evidence that there was any agreement or SJP made a contractual commitment to provide a specific ongoing service, which included regular reviews. Nevertheless, the evidence shows Mr V did in fact receive annual reviews every year between 2011 and 2019 – Mr V’s representative has provided copies of annual suitability review letters it obtained from SJP. In 2019, SJP provided further advice to Mr V. It recommended he move to flexi-drawdown. This was to cater for Mr V’s need for a lump sum, which meant he wanted more than his existing capped drawdown arrangement allowed. Mr V, via his representative has argued that this was a new product and so fell under the post-RDR regime, while any plan receiving new contributions after this period also required ongoing reviews. SJP says Mr V’s existing retirement account was converted from a capped drawdown to a flex-drawdown arrangement – it was not a new product. Looking at the relevant regulatory rules, these essentially say that a firm may continue to accept a commission after 30 December 2012, if a personal recommendation made to the same client after this date can be properly regarded as being linked to the pre-31 December 2012, recommendation, and is not a new recommendation. In support of this being the case here, I can see the suitability letter from 2019, said there would be: “no change in the charges that apply to your funds under the SJP Retirement Account…” It also referred to converting the arrangement within Mr V’s existing Retirement Account quoting the same reference or account number. Furthermore, SJP’s system records show each tranche of Mr V’s pension plan (crystallised or otherwise) as being ‘pre RDR’ with no separate ongoing advice fee charged. In my view, this supports the advice at this time being considered to be linked to the pre-RDR recommendation, and so SJP could continue to receive commission. I don’t think it acted incorrectly here. And crucially, I’ve not been provided with any compelling evidence, which shows or implies Mr V entered into an agreement with SJP to provide ongoing services at this time or was paying a separately agreed ongoing advice charge. Mr V’s representative has also said that the advice to switch to the flexi-drawdown arrangement coincided with SJP ceasing to provide the previous annual suitability reviews, which it considers is a relevant consideration. As I have said, Mr V did receive annual reviews each year up to 2019. It appears that in 2020, there was a change of SJP partner business or appointed representative. There is evidence that Mr V received an annual review in 2021, 2023 and 2024, in the form of annual ongoing suitability review letters. But there is no evidence of reviews being carried out in 2020 and 2022. In relation to the change in partner business, I’ve thought about the relevant regulatory rules, which explain that trail commission under an existing agreement (taken out pre RDR) could be re-registered to a different business if a consumer became a customer of a new financial adviser (including post-RDR) and set out what the new adviser would need to do in those circumstances. There is a question of whether the change in partner business in 2020, so post RDR, might amount to a re-registration of commission – which might require the new advisers to do more. But it isn’t necessary for me to decide this here because it isn’t important to the outcome of the complaint. This is because I don’t think Mr V has in any event suffered a loss. Crucially here, as I’ve said, trail commission continued to be paid in this case from the annual

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management charge Mr V paid. And this charge was the same regardless of whether SJP provided any ongoing service or not. I have not been provided with evidence that Mr V entered into an agreement with SJP to pay separate ongoing advice charge. So, although it seems Mr V did not get an annual review for the above two years, I’m not persuaded he’s suffered any loss. Mr V would always have been required to pay the same annual management charge on his pension. And he hasn’t therefore paid amounts that he wouldn’t otherwise have done. So, it follows he hasn’t incurred a loss. My final decision For the reasons above, I’ve decided to not uphold this complaint, so I make no award in Mr V’s favour. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr V to accept or reject my decision before 1 April 2026. Paul Featherstone Ombudsman

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