FSA fines firms £143k for pension switching failures

The FSA has levied fines totalling £143,500 on two firms which failed to check the suitability of the pension switching advice they gave their customers.

Perspective Financial Management (PFM), based in Milton Keynes, was fined £49,000, while Cricket Hill Financial Planning (Cricket Hill), in Barnsley, was fined £70,000.

Cricket Hill's director Jeremy Sheard must also pay £24,500. Mark Kelsey, who was responsible for the firm's compliance, was issued with a public censure.

The FSA says it found Cricket Hill's advisers routinely recommended customers switch their pensions to a pension fund risk management service, without sufficiently researching other products.

Cricket Hill failed to demonstrate the suitability of this advice for its mostly financially unsophisticated customers, who mainly had only small pension pots, according to the FSA.

The regulator says Cricket Hill and Sheard also failed to identify and manage conflicts of interest adequately.

Sheard owned shares in the risk management service which his firm was advising most customers to use and this was not disclosed.

No payments, or dividends to shareholders were made by the risk management service firm to Cricket Hill or its directors and employees.

At PFM, the FSA says it found shortcomings in the way the firm monitored its pension switching advice.

This included failing to record basic details of customers' existing pension plan, needs and objectives.

The FSA says it found evidence of unsuitable pension advice in five out of the nine cases it reviewed.

PFM made recommended some customers switch pensions when the new schem was almost identical, meaning they incurred unnecessary costs, the regulator says.

Customers were unable to judge the new costs because the firm also failed to provide adequate information on charges for services such as discretionary fund management, the FSA says.

The FSA also found PFM failed to put in place any procedure to ensure it only recommended Unregulated Collective Investment Schemes (UCIS) to customers who met specific statutory exemptions.

UCIS are considered by the regulator to be complex investments suitable mainly only for sophisticated investors.

Margaret Cole, managing director of the FSA's enforcement and financial crime division says: "The FSA considers the failings at PFM and Cricket Hill to be serious, and will not hesitate to take action where we find evidence of bad practice relating to pension advice."

The FSA says both firms co-operated with its investigations.

In addition to the fines, the FSA has appointed a skilled person to carry out past business reviews of relevant pension switching cases at both firms.