Were this not to happen, it would have the effect of putting Mr M in a better position than he would have been in had the mistake not occurred - he’d have benefitted from receiving the transfer shortfall without any tax being deducted.
As a result, the ombudsman stated that Phoenix was correct in principle to deduct the tax from the payment they made to Mr M in October 2022.
However, it cautioned that it didn’t believe Phoenix undertook the initial shortfall calculation correctly, sending Mr M the shortfall amount three years after the mistake without adding interest for late payment.
Phoenix had already paid Mr M the tax-reduced sum of £6,925.25 and offered to pay a further £2,473.68 as compensation, taking the full amount offered to £9,398.93.
This is equivalent to the total loss in value that Mr M’s new pension policy had experienced as a result of Phoenix not transferring the correct amount in 2019.
Additionally, the net effect of this offer is that Mr M would have benefitted by receiving the full transfer shortfall without deduction of any tax.
Phoenix said, because of its mistakes, it was prepared to pay this extra amount to acknowledge and apologise for the mistakes it had made.
Given all this, the ombudsman stated that Phoenix’s offer was a “fair one”, and that it wouldn’t be asking them to do anything to increase that offer.
However, it added that it was “clear” Mr M experienced distress and inconvenience as a result of the mistake that could have been avoided.
As a result, it was “only fair” that Phoenix pays a separate sum to Mr M as compensation for the distress its actions have caused the client.
The ombudsman stated a D&I award of £500, plus £40 costs, was “appropriate”.
Putting things right
The ombudsman concluded by pointing out Phoenix has already made an offer to put things right, which it described as “fair in the circumstances”
As a result, Phoenix was directed to pay Mr M, if not done already, £2,473.68 as compensation for the transfer shortfall and £500 compensation for distress and inconvenience, plus a further £40 to cover phone costs incurred.
In response to the decision, a Phoenix Group Spokesperson said: “We identified an issue with the customer’s policy and have corrected this.
“The ombudsman agrees that our offer to rectify the situation so that the customer hasn’t lost out financially is fair.
“We are sorry for the inconvenience this caused and have offered compensation in line with the circumstances of the case, which the ombudsman also views as a fair offer for the distress experienced.”
