Firm fined over bad pension advice

A SUBSIDIARY of the financial services group IFG has been fined close to €250,000 in Britain for serious failings in the advice it gave to clients cashing in their pension early.

Financial Services Authority said Berkeley Jacobs Financial Services showed "a blatant disregard for consumers' interests" and tried to release as much cash from people's pensions as possible, often much more than the person needed or wanted.

Berkeley Jacobs was acquired by IFG in 2000 and it has had to put aside €1.3 million to cover compensation for the 5,000 clients affected. The financial adviser was also censured for its misleading television adverts, which promoted only the benefits of releasing money from a pension early, and failed to warn people that doing so would reduce their retirement income.

Pension unlocking allows someone over the age of 50 to release their pension benefits from an occupational or personal pension before they have reached their retirement age. The benefits are transferred to a new pension arrangement from which they can then release their money.

David Kenmir, director of investment firms at the FSA, said: "In this case the firm tried to release as much cash from the consumer's pension as possible, often much more than the consumer needed or wanted.

"The more cash that was released, the more the consumer's hard-earned pension contributions benefited the firm rather than the consumer.

"No consideration was given to the substantial drop in the consumer's pension income or their inability to make up for that loss as they were so close to retirement."

The FSA said Berkeley Jacobs did not identify the breaches in guidelines and did not accept the FSA's concerns when it was first notified of them following the FSA's supervision visit in October, 2002.

"However, after the gravity of the matter became clear to IFG, extensive and appropriate remedial action was taken to address the concerns identified. The FSA also acknowledges the extent of the investment that IFG has since put into Berkeley Jacobs to rectify the compliance issues in the company and the proposals Berkeley Jacobs has put forward to meet the requirements of a past sales review."

These have included: undertaking a review of all advertising and financial promotions to ensure that its advertising strategy complied with the regulator's requirements and the appointment of external consultants to review all sales and compliance procedures.

Berkeley Jacobs was acquired from its founder by IFG Group in September, 2000.