Aj Bell Self Invested Personal Pension · CAS-33672-Q7J6

CAS-33672-Q7J6

Ombudsman’s Determination Applicant Mr M

Scheme AJ Bell Self Invested Personal Pension (the SIPP)

Respondent AJ Bell

Outcome

Complaint summary

Background information, including submissions from the parties

“Taking benefits from your pension is an important decision. We recommend that you take advice from a regulated financial adviser before making your decision”.

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• When it was notified by HMRC that a tax refund was due, it was required to pay this directly to Mr M.

• The tax refund was not paid from the funds in Mr M’s SIPP.

• If Mr M remained unhappy with the level of service he had received, it would waive the transfer out charge of £75 plus VAT.

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• It apologised that Mr M was not told immediately that he had insufficient funds in his drawdown account.

• All contributions into the SIPP are treated as uncrystallised funds, as this gives Mr M the opportunity to take a further tax-free lump sum.

• The uncrystallised funds had to be converted into the flexible access drawdown fund before Mr M could receive an income payment from these funds.

• When Mr M requested a payment of £4,539, Mr M only had £771.15 remaining in his drawdown fund. So, in order to take additional income, further funds needed to be crystallised.

• Once the payment had been made, all funds in the SIPP were crystallised. If further contributions are made into the SIPP, these would be treated as uncrystallised and could be crystallised at a later date.

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Adjudicator’s Opinion

• Once Mr M took an income payment from the SIPP, his benefits were crystallised. All future contributions that Mr M made after receiving his lump sum, were known as uncrystallised funds. This is because Mr M would be entitled to receive a further tax-free lump sum from those funds. This is all confirmed in the Key Features document. So, AJ Bell is correct in stating that the funds are in one SIPP. However, Mr M’s SIPP has a notional split of crystallised and uncrystallised funds. This is a standard method across the SIPP industry and not unique to AJ Bell.

• This split allows Mr M to take advantage of the tax privileges available, which was referenced in the Key Features document. The split means Mr M can take a further tax-free lump sum from his uncrystallised funds should he wish. AJ Bell cannot know each person’s individual tax situation and, have split the fund value to maximise the potential benefits for its SIPP members, in this case, Mr M.

• It is clear that Mr M would prefer an alternative method, however, the process that AJ Bell uses, does not amount to maladministration. This is supported by Mr M’s own research with the FCA. Further, Mr M confirmed he did not receive financial advice before converting the SIPP to a flexi-access drawdown arrangement. If he

4 CAS-33672-Q7J6 had, the financial adviser would likely have been able to explain the process to avoid any confusion.

• Mr M has also expressed concern regarding the repayment of the overpaid tax. As confirmed in the Terms and Conditions of the SIPP, AJ Bell will repay any overpaid tax directly to the member as directed by HMRC. The evidence supports AJ Bell’s stance that it was following instruction from HMRC, and it was right to follow such instruction. The Adjudicator did not agree that this was maladministration.

Mr M did not accept the Adjudicator’s Opinion and the complaint was passed to me to consider. Mr M provided his further comments which do not change the outcome. I agree with the Adjudicator’s Opinion and note the additional points raised by Mr M.

Mr M said that his complaint was not about AJ Bell splitting his funds into crystallised and uncrystallised funds, rather, the issue was the process in trying to access his crystallised funds. Each time he wants to access his uncrystallised funds, Mr M must complete a new application form and confirm his identity.

Mr M added that:-

• Based on his understanding, a tax-free lump sum is meant to be a one-off event. So, AJ Bell is exploiting a loophole by providing a legalised tax avoidance scheme.

• The Terms and Conditions, Key Features document and AJ Bells’ SIPP benefit guide should have been taken from April 2015; not at today’s date. So, it follows that the quote from the Terms and Conditions of the SIPP regarding the repayment of tax, was not relevant at the time of the complaint in 2017.

• His grievance regarding the tax refund was due to AJ Bell changing its method of deducting tax without informing him. Further, it should not have been his responsibility to contact HMRC for a repayment of overpaid tax.

Ombudsman’s decision

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I do not uphold Mr M’s complaint.

Anthony Arter

Pensions Ombudsman 28 April 2021

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