Scottish Widows Retirement Account · CAS-29911-Q5G4

CAS-29911-Q5G4

Ombudsman’s Determination Applicant Mr E

Scheme Scottish Widows Retirement Account (the Account)

Respondent Scottish Widows

Outcome

Complaint summary

Background information, including submissions from the parties

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• For non-advised clients such as Mr E, it had taken the decision to only offer five funds at the point a Retirement Account was set up. The Control Account was not an option initially available to Mr E.

• Online fund performance information was available once the Account was established and a PIN issued to Mr E. This was confirmed in the first two calls. However, the information online would only be based on the value of the fund at the close of business the previous day. Any valuation based on this information would not have been guaranteed. At any point, Mr E could have called and requested a policy value.

• Scottish Widows does not offer the facility for live fund prices.

• The Control Account is intended for short term use, primarily intended to allow cash payments to and from the Account.

• He had made clear in the course of the telephone calls with Scottish Widows that he was a very risk averse individual and therefore a feature of the Account that was relevant to him was the Control Account. He should have been informed of it, and had he been he would have selected it and avoided the subsequent losses that he suffered.

2 CAS-29911-Q5G4 • In the Retirement Journey call he ought to have been speaking with a retirement specialist, then the Control Account would have been discussed and he would have opted for it. It was irresponsible not to have a knowledgeable specialist speak with him during this discussion.

• He selected Portfolio C over Portfolio 5, because, although Portfolio 5 was his first choice, on reviewing the information, he concluded Portfolio 5 was not appropriate. It was described as “for investors over the short term and those planning to keep their pension pot invested for only a couple of years”, whereas he intended to keep the pension for 10-15 years.

• Portfolio C was the lowest risk appropriate option as Portfolio 5’s charges and inflation would have caused an erosion of his pension. The Control Account would not have had such high charges and would have better retained the pension’s value. He had no capacity for loss and therefore the Control Account was ideal for him.

• He had always invested in the lowest risk option and Scottish Widows had a duty to its loyal customers to acknowledge this. To do so would not have to extend to financial advice. The involvement of a financial adviser would not have altered his attitude to risk.

• Scottish Widows should also have confirmed the series of portfolio he was selecting as this would have given him a better insight into historical performance. By not providing this information Scottish Widows was acting irresponsibly.

• Although fund value information is on the basis of the value at close the previous day, it gives a good indication of the fund performance and would have influenced his decision making if he had been referred to it.

• He cannot have requested information about the Control Account if he was not aware of it. The individual in the Retirement Journey conversation should have been expected to know of the Control Account and to have made him aware of it.

• Even if it was not disclosed in the first call, it ought to have been disclosed in the second call on 18 December 2018.

• The losses suffered caused significant stress and only through moving to the Control Account was this relieved.

Adjudicator’s Opinion

• Scottish Widows’ decision to restrict individuals in Mr E’s position to the five investment portfolios was a legitimate commercial decision. Although Mr E would like to have been informed of the Control Account, the absence of information about this Account feature was reasonable given it was not available to Mr E at the time. 3 CAS-29911-Q5G4 • Having been provided with the options that were available to him, Mr E selected, on a non-advised basis, the second lowest risk fund, Portfolio C. Had Mr E been unsure of this decision, he could have requested more information, or sought financial advice.

• When Mr E spoke to Scottish Widows, on 18 December 2018, it could have brought the Control Account to his attention, but in the absence of a specific enquiry about a cash only account, there was no requirement for Scottish Widows to highlight it to him.

• Additionally, Mr E was aware of a lower risk alternative, Portfolio 5, but he did not choose it. This suggests he may not have selected the Control Account even if it was discussed. Mr E has explained that the charges associated with Portfolio 5 made it unappealing, but nevertheless, if risk mitigation was what Mr E preferred, he ought reasonably to have selected Portfolio 5 rather than Portfolio C, regardless of the accompanying higher charges. This balance between charges and higher risk was for Mr E to decide as a non-advised client, and he selected higher risk.

• Mr E may well have selected the Control Account at an earlier opportunity, if it had been brought to his attention, but in the absence of incorrect information or the omission of required information, there is no reason to uphold the complaint.

• The specific series of Portfolio C, that Mr E was invested in, does not appear to be a determining factor in the complaint given that the choice was between Portfolio 5 and Portfolio C, and the differentiating features remained constant regardless of the series of fund. This information seems unlikely to have been a reason for Mr E to select one fund over the other.

• As a non-advised client, Mr E’s rights to complain of the extent of the information provided by Scottish Widows, is more limited, and the objective of the retirement journey conversation appears to have been misunderstood by Mr E. This was not intended to detail all of the features of the options available to him, but instead would provide an overview from which he could make a decision. This is a reasonable approach in the circumstances, and Mr E was informed of the options that were available to him when he established the Account; the five portfolios.

• While the situation will have caused Mr E stress and concern, volatility is an inherent risk when investing, particularly over such a short investment timeframe as in this case. Mr E selected Portfolio C over a lower risk alternative.

Mr E did not accept the Adjudicator’s Opinion and the complaint was passed to me to consider. Mr E provided further comments, which the has Adjudicator addressed. Mr E’s further submissions do not change the outcome. I agree with the Adjudicator’s Opinion and I will therefore only respond to the points made by Mr E for completeness.

4 CAS-29911-Q5G4 Ombudsman’s decision

I do not uphold Mr E’s complaint.

Anthony Arter

Pensions Ombudsman 25 March 2020

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