FINAL NOTICE

1.
ACTION

1.1.
For the reasons given in this Final Notice, the Authority hereby:

(1) publishes a statement of Mr Allen’s misconduct for failing to comply with

Statement of Principle 6, pursuant to section 66 of the Act; and

(2) makes an order, pursuant to section 56 of the Act, prohibiting Mr Allen from

performing any function in relation to the regulated activity of advising on

Pension Transfers and Opt-outs carried on by an authorised person, exempt

person or exempt professional firm.

1.2.
The Authority would have imposed a financial penalty of £121,606 on Mr Allen

(reduced to £85,606 as Mr Allen agreed to settle at an early stage of the

Authority’s investigation and therefore qualified for a 30% (stage 1) discount

under the Authority’s executive settlement procedures). However, the Authority

recognises that there is significant liability for redress for Mansion Park’s

customers which has fallen to the Financial Services Compensation Scheme

(FSCS). The amount of liability as at 17 March 2023 was £2,988,898.02. Had it

not been for the compensation limit of £85,000, the total compensation available

to customers would have been £5,322,495.71. In these circumstances, the

Authority has agreed with Mr Allen that that in lieu of the imposition of a financial

penalty, the sum of £85,606 be paid direct to the FSCS to contribute towards any

redress due to Mansion Park’s customers. This is in furtherance of the Authority’s

consumer protection objective. In light of the above and taking into account the

exceptional circumstances of the British Steel Pension Scheme (BSPS), the

Authority hereby publishes a statement of Mr Allen’s misconduct.

2.
SUMMARY OF REASONS

2.1.
During the Relevant Period (8 June 2015 to 17 December 2017), Mr Allen was a

qualified Pension Transfer Specialist (PTS) and performed the CF1 (Director) and

CF30 (Customer) controlled functions at Mansion Park Limited (Mansion Park).

Mr Allen acted without due skill, care and diligence in managing the business for

which he was responsible, because he failed to conduct adequate second level

reviews of Pension Transfer advice given by other advisers at Mansion Park. This

resulted in unsuitable Pension Transfer advice being given to customers (some of

whom were BSPS members) and customers’ retirement funds being unnecessarily

put at risk, against their best interests.

2.2.
Mansion Park advised a total of 400 customers to transfer out of their Defined

Benefit Pension Scheme (DBPS) during the Relevant Period, 81 of whom were

members of the BSPS. Mr Allen carried out a second level review of advice

provided to customers for 328 (82%) of Mansion Park’s 400 DBPS customers who

were considering a Pension Transfer during the Relevant Period, including for 72

customers who were members of the BSPS (22% of the customers for which he

carried out the second level review during the Relevant Period). Mansion Park’s

clients were not charged if the adviser’s recommendation was not to proceed with

the Pension Transfer, or if the transfer did not take place. Mr Allen also directly

advised on a small number of DBPS Pension Transfer files in the capacity of

primary adviser.

2.3.
The Authority reviewed a sample of 21 of Mansion Park’s completed Pension

Transfer advice files dating from the Relevant Period (the Sample Files). Mr Allen

performed the second level review on 18 of the Sample Files, 6 of which related

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to customers who were members of the BSPS. For the majority of these

customers, their pension fund was their most valuable asset, and many had

limited additional resource or other pension provisions. The Authority found that

a large proportion of files were not compliant with regulatory rules and guidance

relating to the suitability of Pension Transfer advice.

2.4.
Of the 18 Sample Files where Mr Allen was the second level reviewer:

a) in 15 of the files (83%), the primary adviser had failed to collect sufficient

client information. In 3 of these files, the primary adviser made a Personal

Recommendation without collecting the necessary information to assess the

suitability of the advice; and

b) in 12 of the files (67%) which contained enough information to assess

suitability, unsuitable Pension Transfer advice was provided.

2.5.
As at 17 March 2023, the FSCS has upheld 64 claims against Mansion Park relating

to the provision of DBPS Pension Transfer advice and paid out £2,988,898.02 in

compensation to its former customers. The Financial Ombudsman Service has

issued 1 final decision dated 8 September 2020 upholding a complaint made by a

customer regarding DBPS Pension Transfer advice received from Mansion Park.

FCA’s Statements of Principle for Approved Persons

2.6.
From 8 June 2015 to 6 March 2016, Statement of Principle 6 stated that an

approved person performing an accountable significant-influence function must

exercise due skill, care and diligence in managing the business of the firm for

which they are responsible in their accountable function.

2.7.
From 7 March 2016 to 17 December 2017, Statement of Principle 6 stated that

an approved person performing an accountable higher management function must

exercise due skill, care and diligence in managing the business of the firm for

which they are responsible in their accountable function.

Mr Allen’s failings in the performance of his CF1 (Director) function

2.8.
The Authority considers that, during the Relevant Period, by reason of the matters

described below in section 4 of this Notice, Mr Allen breached Statement of

Principle 6, in that he failed to act with due skill, care and diligence in carrying

out the second level review of the Pension Transfer advice given to customers by

other advisers at Mansion Park.

2.9.
In particular, in the Sample Files reviewed by the Authority where Mr Allen was

the second level reviewer of the advice given by other advisers at Mansion Park,

the advice given:

a) was unsuitable because it included Personal Recommendations to customers

based on the flawed assumption that a transfer to meet their stated objectives

was in the customer’s best interests. In reality, many customers’ objectives

were either not realisable or financially viable, or could have been met by the

existing scheme;

b) did not assess, or give due consideration to, whether customers would be

reliant on the income from their DBPS or whether they could financially bear

the risks involved in a Pension Transfer. A reasonably competent adviser

should have known that, following the recommended transfer, customers’

retirement income would be dependent on the performance of the new

investment;

c)
advised clients with no source of retirement income other than their DBPS

and state pension, and who had cautious attitudes to risk, to give up their

guaranteed benefits without sufficient justification;

d) failed to properly assess whether the customer had the necessary experience

and knowledge to understand the risks involved in the Pension Transfer

recommended, and failed to give due consideration to this where they did

not;

e)
did not include adequate transfer analysis to compare the benefits likely to

be paid under the DBPS with benefits paid out under the Proposed

Arrangement or other pension scheme into which it was proposed that the

client should transfer; and

f)
included Suitability Reports with inadequate information about the possible

disadvantages of transferring out of the customer’s DBPS, having regard to

their specific circumstances and objectives. Although Suitability Reports

contained caveats and risk warnings regarding Pension Transfers, the

Authority considers that the Personal Recommendation was unclear and

risked being confusing for customers. The warnings and Personal

Recommendation to transfer were often contradictory, with no explanation.

2.10.
BSPS members made up 18% of Mansion Park’s Pension Transfer advice

customers during the Relevant Period and 6 of the 18 Sample Files reviewed by

the Authority where Mr Allen was the second level PTS reviewer were members

of the BSPS. These individuals were in a vulnerable position at the time due to

the uncertainty surrounding their employment and the future of the BSPS and it

was critical that the advice they received from Mansion Park, and on which they

placed reliance was clear, fair and not misleading and suitable for their particular

circumstances. Unfortunately, many of Mansion Park’s BSPS customers did not

receive appropriate advice to enable them to make a sufficiently informed decision

about their Pension Transfer.

2.11.
The unsuitable advice reviewed by Mr Allen had serious consequences, specifically

a lasting impact on his customers’ pension arrangements and their financial

wellbeing during retirement.

2.12.
The Authority considers Mr Allen’s failings to be serious because:

a) they caused a significant risk of loss to customers who transferred out of their

DBPS on the basis of advice which Mr Allen had reviewed. The total value of

transferred funds was approximately £97,821,000 with an average Cash

Equivalent Transfer Value (CETV) of approximately £268,000; and

b) the advice Mr Allen reviewed impacted a number of BSPS members, many of

whom were in a vulnerable position due to the uncertainty surrounding the

future of the BSPS.

2.13.
The Authority considers that Mr Allen has demonstrated a lack of competence and

capability to advise on Pension Transfers and Pension Opt-outs. As a result of the

facts and matters set out in this Notice, Mr Allen is not a fit and proper person to

carry out the regulated activity of advising on Pension Transfers and Pension Opt-

outs carried on by an authorised person, exempt person or exempt professional

firm. The Authority hereby prohibits Mr Allen from performing any such function.

2.14.
The Authority would have imposed a financial penalty of £121,606 on Mr Allen

(reduced to £85,606 as Mr Allen agreed to settle at an early stage of the

Authority’s investigation and therefore qualified for a 30% (stage 1) discount

under the Authority’s executive settlement procedures). However, the Authority

recognises that there is significant liability for redress for Mansion Park’s

customers which has fallen to the FSCS. The amount of liability as at 17 March

2023 was £2,988,898.02. Had it not been for the compensation limit of £85,000,

the total compensation available to customers would have been £5,322,495.71.

In these circumstances, the Authority has agreed with Mr Allen that that in lieu of

the imposition of a financial penalty, the sum of £85,606 be paid direct to the

FSCS to contribute towards any redress due to Mansion Park’s customers. This is

in furtherance of the Authority’s consumer protection objective. In light of the

above and taking into account the exceptional circumstances of the BSPS, the

Authority hereby publishes a statement of Mr Allen’s misconduct for failing to

comply with Statement of Principle 6.

3.
DEFINITIONS

3.1.
The definitions below are used in this Notice:

“the Act” means the Financial Services and Markets Act 2000;

“Attitude to Risk” means the client’s attitude to, and understanding of, the risk of

giving up safeguarded benefits for flexible benefits;

“the Authority” means the body corporate previously known as the Financial

Services Authority and renamed on 1 April 2013 as the Financial Conduct

Authority;

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“the Authority’s Rules” means the Authority’s Conduct of Business Sourcebook as

applicable during the Relevant Period;

“Statements of Principle” or “APER” means the Authority’s Statements of Principle

for Approved Persons and Code of Practice for Approved Persons;

“the British Steel Pension Scheme” or “BSPS” means the British Steel DBPS that

was in force during the period 8 June 2015 to 13 December 2017;

“BSPS 2” means the scheme which replaced the BSPS after 13 December 2017;

“Ceding Arrangement” means the customer’s existing pension arrangement with

safeguarded benefits;

“CETV” means Cash Equivalent Transfer Value, which is a lump sum available to

the member upon transferring their pension benefits into an alternative pension.

It is calculated according to actuarial principles;

“COBS” means the Conduct of Business Sourcebook, part of the Handbook;

“Critical Yield” means an illustration of the annual growth rate (net of charges)

that the customer would need to obtain upon investment of the CETV in order to

replicate the benefits provided by the Defined Benefit Pension Scheme;

“Defined Benefit Pension Scheme” or “DBPS” means an occupational pension that

pays out a defined benefit or guaranteed specified amount to the pension holder

based on factors such as the number of years worked and the customer’s salary

“Defined Contribution Pension” or “DC Pension” means a pension that pays out a

non-guaranteed and unspecified amount depending on the defined contributions

made and the performance of investments;

“DEPP” means the Authority’s Decision Procedure and Penalties Manual;

“EG” means the Authority’s Enforcement Guide;

“the Handbook” means the Authority’s Handbook of rules and guidance;

“Mansion Park” means Mansion Park Limited;

“Pension Commencement Lump Sum” or “PCLS” means a tax-free lump sum of

money that can be drawn from the pension fund at retirement;

“Pension Opt-out” has the meaning given in the Handbook and includes a

transaction resulting from the decision of a retail client to opt out of an

occupational pension scheme to which his employer contributes and of which they

are a member;

“Pension Protection Fund” or “PPF” means a statutory public corporation which

protects people who belong to a DBPS, if the employer responsible for funding the

scheme they have paid into becomes insolvent;

“Pension Transfer” has the meaning given in the Handbook and means a transfer

payment made in respect of any safeguarded benefits with a view to obtaining a

right or entitlement to flexible benefits under another pension scheme;

“Pension Transfer Specialist” or “PTS” has the meaning given in the Authority’s

Handbook and includes an individual appointed by a firm to check the suitability

of, amongst other things, a Pension Transfer, who has passed the required

examinations as specified in the Training and Competence Sourcebook, part of

the Handbook;

“Personal Recommendation” means a recommendation that is advice on transfer

of pension benefits into a personal pension or Self-Invested Personal Pension, and

is presented as suitable for the customer to whom it is made, or is based on a

consideration of the customer’s circumstances;

“Preferred Retirement Date” means the date when the customer plans to retire;

“Proposed Arrangement” means the arrangement with flexible benefits into which

the customer would move their funds from the Ceding Arrangement;

“Regulated Apportionment Arrangement” or “RAA” means the statutory

mechanism that can be used in corporate restructuring whereby a sponsoring

employer of a DBPS stops participating in the pension scheme (therefore freeing

the sponsoring employer from its financial obligations to the pension scheme) in

order to avoid insolvency, subject to certain conditions being met and the RAA

being approved by The Pensions Regulator and the PPF;

“Relevant Period” means the period from 8 June 2015 to 17 December 2017;

“the Sample Files” means the 21 completed Pension Transfer advice files provided

by Mansion Park and reviewed by the Authority;

“Suitability Report” means the report which a firm must provide to its client under

COBS 9.4.1R which, amongst other things, explains why Mansion Park has

concluded that a recommended transaction is suitable for the client;

“Tribunal” means the Upper Tribunal (Tax and Chancery Chamber);

“TVAS” means “Transfer Value Analysis” and is the comparison that a firm was

required to carry out in accordance with COBS 19.1.2R prior to 1 October 2018,

when a firm gave advice or a Personal Recommendation about, amongst other

things, a Pension Transfer;

“TVAS Report” means a document that sets out for the client a comparison of the

benefits likely (on reasonable assumptions) to be paid under the Ceding

Arrangement with the benefits afforded by the Proposed Arrangement, which

firms were required to carry out in accordance with COBS 19.1.2R (and prepare

in accordance with COBS 19.1.3R and 19.1.4R) prior to 1 October 2018.

4.
FACTS AND MATTERS

4.1.
Mansion Park was an independent financial adviser firm based in Ashby de la

Zouch, Leicestershire, which was authorised by the Authority on 15 May 2002.

During the Relevant Period Mansion Park had permission to carry on regulated

activities including advising on Pension Transfers, advising on investments and

arranging (bringing about) deals in investments.

4.2.
On 8 December 2017, the Authority visited Mansion Park’s offices. On 12

December 2017, following intervention by the Authority, Mansion Park applied for

the imposition of voluntary requirements, whereby Mansion Park would cease all

regulated activities relating to DBPS Pension Transfer business. Mansion Park

entered creditors voluntary liquidation on 30 November 2020.

4.3.
During the Relevant Period, 19 advisers at Mansion Park provided DBPS Pension

Transfer advice, with second level review and sign-off provided by five PTSs. In

some instances, those PTSs also advised clients directly.

4.4.
Mr Allen carried out the second level review of advice provided to 328 (82%) of

Mansion Park’s 400 DBPS Pension Transfer customers during the Relevant Period,

including 72 customers who were members of the BSPS. All 328 customers were

advised to transfer out of their DBPS. Some initial meetings were held with

customers who then did not proceed through the advice process, but all 328

customers who proceeded through the advice process were advised to transfer

out of their DBPS. Mr Allen also directly advised on a small number of DBPS

Pension Transfer files in the capacity of primary adviser.

4.5.
Mr Allen has worked in the financial services industry since 1997, qualifying as a

PTS in 2002. He held various roles in financial services before joining Mansion

Park in January 2014 as an adviser and PTS.

4.6.
Mr Allen held the CF1 (Director) Controlled Function at Mansion Park from 27 May

2015 until after the end of the Relevant Period, holding the title of Investment

Director from May 2015, with responsibility for leading the Investment

Committee. He also held the CF30 (Customer) Controlled Function from 7 January

2014 to 30 November 2017.

4.7.
Mr Allen was one of 5 PTSs at Mansion Park. He was responsible for giving Pension

Transfer advice to customers, and was also given responsibility by Mansion Park

for carrying out a second level review and sign-off of Pension Transfer advice

provided by other advisers at the firm. This included checking advice provided to

a number of BSPS customers. During the Relevant Period Mr Allen also carried

out one to one meetings with advisers and guided them in the process of taking

a case from start to finish. In his CF1 role, Mr Allen sat on the Mansion Park Board

and attended meetings where the Pension Transfer advice process was discussed,

including meetings where concerns were raised regarding the conduct of that

business.

Pension Transfers out of Defined Benefit Pension Schemes

4.8.
Pensions are a traditional and tax-efficient way of saving money for retirement.

The value of an individual’s pension can have a significant impact on their quality

of life during retirement and, in some circumstances, may affect whether they can

afford to retire at all. For some people, they are the only means of funding

retirement. Customers who engage authorised firms to provide them with advice

in relation to their pensions place significant trust in those providing the advice.

Where a financial adviser fails to conduct the affairs of their advice business in a

manner that is compliant with the Authority’s regulatory requirements, this

exposes their customers to a significant risk of harm.

4.9.
Pensions can be structured in a variety of ways. However, a DBPS is particularly

valuable because an employer sponsor carries the financial burden associated with

offering a secure, guaranteed income for life to members, which typically

increases each year in line with inflation. This is in contrast to, for example, a DC

pension scheme where employer and employee capital contributions are invested,

but the investment and mortality risk are borne by the member. The Authority

expects that for the majority of customers it is in their best interests to remain in

their DBPS because of the guarantees and protections it offers.

4.10.
Customers who engage advisers and authorised firms to provide them with advice

in relation to their pensions therefore place significant trust in them. It is

important that firms and their advisers exercise due skill, care and diligence when

advising customers regarding their pensions, ensuring that the advice given to a

customer is suitable for them, having regard to all of their relevant circumstances.

This is even more important when customers have no option but to make a

decision regarding their pension.

4.11.
Transfer out of a DBPS involves giving up the guaranteed benefits in exchange for

a CETV which is typically invested in a DC pension. If a customer leaves a DBPS,

they will have to buy an annuity to obtain a guaranteed level of income.

Alternatively, they may rely on income from investments, but investments will

have to be managed in such a way as to produce ongoing income; and even then,

there is no guarantee as to the amount or duration of that income.

4.12.
The introduction of pensions freedoms (introduced in April 2015) for DC pensions

made transferring out of a DBPS an attractive option for some people. For

example, a customer who will not be reliant on the DBPS income in retirement

and who wishes to achieve a realistic objective attainable only once transfer has

been effected may be an example of a suitable candidate. However, as referenced

in COBS 19.1.6G, the Authority considers that, given the nature of the guaranteed

benefits provided under a DBPS, advisers’ default assumption should be that

transferring out and giving up those benefits is unlikely to be suitable for a

customer unless they can clearly show, based on a customer’s specific

circumstances, that it is in their best interests.

The British Steel Pension Scheme

4.13.
During the Relevant Period 72 (22%) of the 328 DBPS Pension Transfer files

Mr Allen reviewed were members of the BSPS.

4.14.
The BSPS was one of the largest DBPS in the UK, with approximately 125,000

members and £15 billion in assets as of 30 June 2017. In March 2017, the BSPS

was closed to future accruals, which meant that no new members could join it and

existing members could no longer build up their benefits. The BSPS also had an

ongoing funding deficit.

4.15.
In early 2016, various options were being explored in relation to the BSPS as a

result of insolvency concerns relating to one of its sponsoring employers. These

options included seeking legislative changes which would have allowed pension

increases available under the BSPS to be reduced to the statutory minimum levels,

and the sale of one of the sponsoring employers. However, it was concluded that

the only way to avoid insolvency would be to enter into a Regulated

Apportionment Arrangement (RAA).

4.16.
On 11 August 2017, the Pensions Regulator gave its clearance for the RAA. Under

the RAA, the BSPS would receive £550 million and a 33% equity stake in one of

the sponsoring employers and the BSPS would transfer into the PPF. In addition,

a new DBPS (BSPS 2) was proposed by the sponsoring employers in combination

with the RAA proposal. The RAA received formal approval on 11 September 2017,

which resulted in the BSPS being separated from the sponsoring employers.

4.17.
As a consequence of the RAA, members of the BSPS were required to make a

choice between two options offered by the BSPS, namely to either:

a) remain in the BSPS and therefore move into the PPF (suffering a 10% drop in

the value of their fund in doing so); or

b) transfer their benefits into BSPS 2.

4.18.
Alternatively, BSPS members could take a CETV and transfer their pension

benefits into an alternative pension arrangement (for example a personal pension

scheme or another occupational pension scheme held by the member).

4.19.
On 11 and 21 September 2017, the BSPS announced that it would separate from

the sponsoring employers, including the principal sponsor, Tata Steel UK.

Information about the options available to members was available on the BSPS’

website from 11 August 2017, and in October 2017, the BSPS distributed

information packs to members about these options. There were over 20 different

packs to take account of the different categories of members. The pack contained

individual estimates of BSPS 2 entitlements, generic information about PPF

compensation and comparisons between the two schemes. On the basis of this,

members were asked to decide whether they wanted to transfer their pension

rights to the new pension scheme, BSPS 2, which would be less generous than

the old scheme but more generous than PPF compensation for the majority of

members, or stay with the old scheme and move into the PPF. Members were

required to choose their preferred option by 22 December 2017. Those who

wanted to transfer their pension benefits from the BSPS to a personal pension

were required to submit the required paperwork to execute the transfer by 16

February 2018.

4.20.
The Rookes Review, an independent review of the support given to BSPS members

during the restructuring and “Time to Choose” exercise, stated that BSPS

members experienced, and were influenced by, a set of unique circumstances.

This included the following:

a) distrust of their employer;

b) limited information on alternative options;

c)
tight timescales to make a decision; and

d) limited support.

4.21.
Some BSPS members were in vulnerable circumstances. For example, BSPS

members tended to have no other assets and relied more on income from their

DBPS than members of other schemes.

Mansion Park’s Pension Transfer advice business and Mr Allen’s role

Initial and ongoing transfer fees / contingent fee arrangements

4.22.
Mansion Park charged clients they were advising on their Pension Transfer a tiered

percentage of the CETV, if the recommendation was to transfer out of their DBPS

(as was the recommendation for each of Mansion Park’s 400 clients who

proceeded through the advice process during the Relevant Period, including each

of the 328 clients for whom Mr Allen carried out the second level review). Mansion

Park’s clients were not charged if the adviser’s recommendation was not to

proceed with the Pension Transfer, or if the transfer did not take place.

4.23.
The percentage fee ranged from 1.5-5% of the gross amount transferred, but the

typical fee charged was between 2% to 3% of the amount transferred. A lower

percentage fee was charged, on a sliding scale, for significant transfers above the

value of £300,000. An ongoing monthly adviser commission was also charged,

typically at 0.5% per annum of the fund invested. Mr Allen received £2,060.30

resulting from the transfer of customers’ pensions out of their DBPS where he had

carried out the second level review of the advice during the Relevant Period.

Increase in DBPS work at Mansion Park

4.24.
Mansion Park acquired permission to provide Pension Transfer advice in May 2002.

From early 2017, Mansion Park began to receive a significant increase in Pension

Transfer enquiries.

The Pension Transfer Advice Process

4.25.
According to Mansion Park’s documents setting out the process which was

purportedly in place during the Relevant Period, Mansion Park’s Pension Transfer

advice process was as follows:

a) following an initial call, an introductory discussion would take place at a face-

to-face meeting about the customer’s aims and objectives and the options

available. At this meeting, the adviser would complete a fact find, take further

notes and complete and exchange other documents with the customer.

Following that initial discussion, some customers decided not to proceed

further and therefore did not receive advice; and

b) where a customer wished to proceed following the face-to-face meeting, the

adviser would then request information from the customer’s Ceding

Arrangements and investment research would be conducted to provide a basis

for the advice. Research would be uploaded to a customer file and a TVAS

and Suitability Report would be prepared.

PTS file check

4.26.
In response to the growing levels of DBPS Pension Transfer advice business that

Mansion Park was undertaking and concerns that there were no PTSs in the

Compliance Team, Mansion Park added a step to the process whereby Pension

Transfer advice would be submitted for “double sign off by PTS”, and advice could

not be provided to clients without first being reviewed by a PTS. Mansion Park had

five PTSs during the Relevant Period, one of which would be assigned to review

each file.

4.27.
The advice process was the same whether the primary adviser providing Pension

Transfer advice to the client was a PTS or not, except that if the primary adviser

was a non-PTS, then from 23 May 2016, following the first client meeting they

would hold an initial discussion with the PTS to discuss the merits of proceeding

to the advice stage.

4.28.
Once the information gathering steps described at paragraph 4.25 above had been

completed, the file would then be passed to a PTS for their review. The PTS would

undertake a full review of the file to include information and material provided

recorded on a file-check sheet. The PTS communicated any remedial work they

thought needed to be undertaken (for example, if further information was needed

from the customer) to the adviser by email or telephone. The PTS would not

communicate directly with the client as part of the review process.

4.29.
Other than discussions which arose in the course of Board and Investment

Committee meetings, PTSs did not meet to discuss issues or risks which might

have arisen in the Pension Transfer advice process.

Mansion Park’s compliance arrangements

4.30.
Once the advice had been finalised and the PTS review had been completed, a

customer file would be sent to Mansion Park’s Compliance department to review

the file. The Compliance team did not include any PTSs. Compliance would deal

directly with the adviser if there were any queries. Once Compliance had reviewed

the file, the adviser would visit the client to present the Personal Recommendation

and discharge the obligations in COBS 19.1.2R(3) and (4), to explain the TVAS

Report to the customer and take reasonable steps to ensure that they understood

the TVAS Report and the advice.

External Compliance Review and issues raised by Compliance

4.31.
Occasionally, Compliance would seek external assistance in relation to the firm’s

pension advice process. In August 2017, Mansion Park obtained an external report

on its Pension Transfer advice process. The report assessed two customer files as

well as some other aspects of the advice process for Pension Transfer business.

In summary, the report concluded that Mansion Park’s processes around Pension

Transfer advice were “basically sound and robust”. Of the two files reviewed for

this report, one was deemed suitable while the other was considered unclear, as

it was found that “[f]urther information is required before an opinion on suitability

can be issued”.

4.32.
In October 2017, Compliance raised concerns relating to the advice given by one

of Mansion Park’s advisers and six of their files were sent for external review. For

all six files, the suitability of advice was rated as “unclear”. One file was given a

red rating under the “material compliance” criteria. These files had all been second

level reviewed by Mr Allen and he had allowed them to proceed through the advice

process.

Adherence to the advice process

4.33.
Although Mansion Park explained that the advice process explained above was in

place during the Relevant Period, the Authority’s feedback letter to the firm dated

8 February 2018 (following the visit on 8 December 2017) identified some

concerns that the process was not being adequately followed.

Mr Allen’s approach to Pension Transfer Advice

Second level review role

4.34.
Mr Allen was one of 5 PTSs at Mansion Park who carried out second level reviews

of the Pension Transfer advice given by other advisers at Mansion Park, including

advice which had been prepared by advisers who were qualified as PTSs and those

who were not. Mr Allen’s second level review consisted of a review of the full client

file, which included relevant documents such as the client meeting notes and fact

find, the TVAS Report, information about the Ceding Arrangement, and the final

Suitability Report and illustrations. At interview, Mr Allen noted he would conduct

an objective review of the file, irrespective of whether the file had been prepared

by an adviser who was a qualified PTS or not.

4.35.
Mr Allen used a pro forma file check sheet to pass feedback to the advisers whose

files he reviewed, indicating whether he thought the adviser had passed or failed

in verifying client information and providing sufficient reasoning for their Personal

Recommendation.

4.36.
Based upon the Authority’s review of the Sample Files and other evidence, the

second level reviews of customer files conducted by Mr Allen appear to have been

insufficiently detailed. The pro forma check sheets completed by Mr Allen and

reviewed by the Authority suggest that Mr Allen provided inadequate challenge

and feedback when carrying out his second level review, including for those advice

files which the Authority deemed to be unsuitable in its review of the Sample Files.

4.37.
Mr Allen’s failure to review customer files with due skill, care and diligence caused

a significant risk of harm to Mansion Park’s customers, in particular the risk that

they would be provided with unsuitable advice.

The Authority’s Review of Mansion Park’s Advice

Review of a sample of files

4.38.
In November and December 2017, the Authority visited and reviewed the

processes of firms active in the Pension Transfer advice market. On 8 December

2017, the Authority visited Mansion Park’s offices. Following that visit, the

Authority requested and assessed a sample of 21 of Mansion Park’s customer files

(the Sample Files). All of the Sample Files related to customers who completed

Pension Transfers out of their DBPS. Mr Allen completed the second level review

as PTS on 18 of the Sample Files; 6 of the 18 Pension Transfers were for customers

who were BSPS members.

4.39.
The review of the 18 of the Sample Files where Mr Allen completed the second

level review as PTS was carried out using the Defined Benefit Advice Assessment

Tool (DBAAT) and found that:

a) the primary adviser failed to collect all required information to provide Pension

Transfer advice in 15 out of 18 of cases. In 3 of these cases the absence of

information was so significant that the Authority was unable to assess

whether the firm’s advice was suitable (see “Information Collection Failures”

below);

b) Mr Allen signed off on unsuitable Pension Transfer advice in 12 of the cases

reviewed (see “Unsuitable Pension Transfer Advice” below); and

c)
the primary adviser gave unsuitable investment advice in 6 out of 18 cases.

In 3 cases the absence of information was so significant that the Authority

was unable to assess whether the Firm’s investment advice was suitable (see

“Unsuitable Investment Advice” below).

4.40.
The average transfer value for the 12 customers who received unsuitable Pension

Transfer advice, and the 3 files not assessed for suitability of advice due to

material information gaps, was approximately £268,809.02. Mr Allen signed off

on all these files as the second reviewer and a PTS. 5 of the 12 customers who

received unsuitable advice were members of the BSPS. 1 of the 3 files not

assessed for suitability of advice due to material information gaps belonged to a

member of the BSPS.

4.41.
For most of these customers, their DBPS was their most significant asset by some

measure. These customers had very limited financial resources available to

protect them from any downturn in their finances and could not be described as

financially resilient.

4.42.
During the Relevant Period, COBS 9.2.1R stated that a firm must take reasonable

steps to ensure that a Personal Recommendation (which includes, in this context,

a recommendation to transfer or not to transfer a pension) was suitable for its

customer (COBS 9.2.1R, see Annex A).

4.43.
When making a Personal Recommendation, a firm must first obtain the necessary

information regarding the customer’s: (a) knowledge and experience in the

investment field relevant to the Pension Transfer; (b) financial situation; and (c)

investment objectives.

4.44.
COBS 9.2.2R stated that a firm must obtain from the customer such information

as is necessary for the firm to understand the essential facts about them and have

a reasonable basis for believing, giving due consideration to the nature and extent

of the service provided, that the specific transaction to be recommended, or

entered into in the course of managing: (a) meets their investment objectives;

(b) is such that they are able financially to bear any related investment risks

consistent with their investment objectives; and (c) is such that they have the

necessary experience and knowledge in order to understand the risks involved in

the transaction or in the management of their portfolio.

4.45.
COBS 9.2.6R stated that if a firm did not obtain the necessary information to

assess suitability, it must not make a Personal Recommendation. Making a

Personal Recommendation without the necessary information increases the risk

of providing unsuitable advice.

Failure to collect necessary information to assess suitability of the proposed

4.46.
In 3 out of the 18 Sample Files in which Mr Allen had carried out the second level

review, a Personal Recommendation was made without the adviser having

gathered sufficient information to assess the suitability of the proposed Pension

Transfer. This put the customer at risk of receiving unsuitable advice.

Additional information collection failures

4.47.
In addition to cases where the absence of necessary information meant that an

assessment could not properly be made, and therefore suitability could not be

demonstrated, there was a failure to collect necessary information in a further 12

of the Sample Files where Mr Allen was the second level reviewer. For example:

a) in 6 out of the 18 Sample Files, information regarding the customer’s wider

financial situation was missing, including details of additional pensions held

by the customer and their spouse; and

b) in 5 out of the 18 Sample Files, there was a failure to obtain and discuss some

aspects of the customer’s income needs and expenditure in retirement,

including their basic living costs, lifestyle expenditure and discretionary

expenditure.

4.48.
Despite the absence of complete information for these customer files, the

Authority was able to assess transfer suitability by making reasonable

assumptions or inferences as to the missing information. All of these files were

assessed by the Authority as containing unsuitable transfer advice.

Unsuitable Pension Transfer advice

4.49.
The Authority’s review of the 18 Sample Files where Mr Allen carried out the

second level review found that 12 customers (67%) received unsuitable Pension

Transfer advice. The Authority was unable to assess whether the Pension Transfer

advice provided to 3 of the 18 customers was suitable due to material information

gaps, of which 1 was a former BSPS member. Of the 12 customers who received

unsuitable Pension Transfer advice, 5 were former BSPS members.

4.50.
The Authority found that the advice given to transfer which was reviewed by

Mr Allen was unsuitable for a variety of reasons (see below). Some of the files

reviewed contained advice which was found to be unsuitable for multiple reasons.

Reliance on the DBPS and inability to bear transfer risk

4.51.
The Authority assessed the customer as being reliant on the Ceding Arrangement

in 10 out of the 12 files reviewed by the Authority in which Mr Allen completed

the second level review as PTS and where the Authority assessed that unsuitable

Pension transfer advice had been given. A customer was considered by the

Authority to be reliant on income from the Ceding Arrangement in retirement if it

would be their primary income source with no capacity to bear the risk of losing

it; for example, because without it they would be unable to meet non-

discretionary expenditure.

4.52.
For example, in relation to one customer where Mr Allen carried out the second

level review:

a) at the time of receiving advice from Mansion Park, Customer E was aged 55

and their spouse was aged 53. The customer held no savings or investments

and stated that they had “limited” disposable income available each month.

The adviser did not complete a budget planner or capture the customer’s

actual income or anticipated expenditure requirements in retirement. The

customer’s investment objectives were to take the maximum PCLS

immediately to pay for home repairs and improvements and then to leave the

residual fund invested over the medium to long term, in addition to

maximising the value of the benefits payable upon their death; and

b) the adviser did not demonstrate the basis for believing that the customer was

able financially to bear the risk of transfer consistent with their objectives.

Despite this, Mr Allen allowed this file to proceed through the advice process.

Mr Allen should have known that following the recommended Pension

Transfer, the customer’s retirement income would depend on the

performance of the investment in the Proposed Arrangement.

Failure to demonstrate transfer was in customers’ best interests

4.53.
COBS 19.1.6G indicates that a firm should only consider a Pension Transfer to be

suitable if it can clearly demonstrate, on contemporary evidence, that the transfer

is in the client’s best interests. Mr Allen signed off on advice to customers which

failed to demonstrate that specific customer objectives which drove the Pension

Transfer (for example, a wish to maximise their death benefits) meant that the

transfer would be in the customer’s best interests.

4.54.
The Authority considers that the primary purpose of a pension is to meet the

income needs of an individual in retirement. Where a customer expresses a strong

wish to maximise their death benefits, or to increase the flexibility of alternative

arrangements, there is an increased risk that this will undermine the primary

purpose of their pension. A balance therefore needs to be achieved between these

objectives, which is in the best interests of the customer given their circumstances

(COBS 9.2.1R(1) and 9.2.2R(1)(b)).

4.55.
In the Authority’s file review, there were several examples where the customer

expressed a wish to maximise their death benefits and/or a need for increased

flexibility, and they were advised to complete a Pension Transfer. However, the

information in those files did not adequately demonstrate that the customer’s

demands and needs had been properly tested, or that a Pension Transfer was in

the customer’s best interests.

4.56.
For example:

a) Customer D expressed a desire for control and flexibility over their pension.

However, it was not apparent from the customer’s financial circumstances or

requirements that transferring out of their DBPS was otherwise in their best

interests;

b) Customer D also listed early retirement as an objective. The interplay

between this objective and reliance on the DBPS’s guaranteed income was

not considered in the assessment contained in the Suitability Report. Because

this analysis was not completed, it was unclear whether this objective was

realistic or affordable;

c)
in the case of Customer E, the adviser recommended that the customer

transfer out of their DBPS, with the intention that the customer would take

flexible benefits that would allow them to access the required PCLS. The file

did not contain any type of assessment of the customer’s realistic income

needs in retirement;

d) maximising death benefits appeared as an objective in some of the files

reviewed by the Authority in which Mr Allen was the second level PTS

reviewer. No consideration was given to how this objective could be met

without transfer out of the DBPS; and

e)
several BSPS customers expressed concerns regarding the options available

to them and the risk of their pension falling into the PPF. The adviser failed

to explore customers’ concerns about the available options and consider what

weight should be attached to them given the customer’s particular

circumstances, and the advice provided in the files reviewed by the Authority

exhibited a general lack of consideration of the alternatives to transferring

out of the Ceding Arrangement. In particular, the risks associated with the

PPF were overstated and its advantages were underplayed.

4.57.
In the files reviewed by the Authority where Mr Allen carried out the second

level review, the advice did not demonstrate how customers’ objectives, such as

those set out above, had been balanced against the need for their pensions to

meet their income needs during retirement, in advising those customers to

proceed to transfer out of their DBPS. Instead, the advice set out in generic terms

the disadvantages of the Pension Transfer, and balanced this with the customer’s

purported level of knowledge as a means of justifying the transfer. As a result, Mr

Allen allowed files to proceed through the advice process where the advice he had

reviewed failed to analyse and present findings as to why, for the customer in

question, weighing the competing factors, the recommendation to transfer out

was in the customer’s best interests.

Lack of necessary attitude to transfer risk and lack of knowledge and experience

4.58.
Mansion Park was required to obtain information on the customer’s preferences

regarding risk-taking and their risk profile (COBS 9.2.2R) to ensure that the

customer was prepared to exchange the guaranteed benefits of the DBPS for non-

guaranteed benefits which are subject to investment risk borne by the customer).

Mansion Park was also required to obtain sufficient information to provide a

reasonable basis for believing that the customer had the necessary experience

and knowledge to understand the risks involved in the Pension Transfer (COBS

4.59.
In some of the files from the Authority’s file review in which Mr Allen was the

second level reviewer, it was unclear whether the customer had the necessary

attitude to transfer risk to support the advice to transfer out of their DBPS. For

a) for Customer H, the mismatch between the customer’s low Attitude to Risk

and the risks associated with transferring out of the Ceding Arrangement

created a contradictory impression in the Suitability Letter. The letter stated

“you are prepared to take a greater degree of risk in order to potentially

achieve a higher pension”, but then confirmed that the customer “agreed”

they were a low-risk investor; and

b) Customer C did not appear to have the necessary Attitude to Risk to support

a transfer out of their DBPS. The customer also had very little knowledge and

experience of investing and the risk profile questionnaire indicated that they

were a ‘low’ risk-taker. There was no evidence of discussions between the

primary adviser and the customer to validate the customer’s understanding

of the risks and why they were prepared to give up the guaranteed benefits

provided by their DBPS.

4.60.
In 8 out of the 12 files reviewed by the Authority in which Mr Allen completed the

second level review as PTS and which the Authority assessed as unsuitable, the

advice did not demonstrate that the customer had the necessary knowledge and

experience to understand the risks of transfer. The information contained in the

files often showed that the customer lacked experience, whereas the primary

adviser did not assess them to be inexperienced.

4.61.
Some of the Suitability Reports recorded only that the customer had little

experience, but some understanding, without recording how the adviser had

formed a reasonable basis for believing that the customer had the necessary

experience and knowledge to understand the risks involved in the Pension

Transfer (COBS 9.2.2R). Where the customer had asserted a level of knowledge

when their investment experience suggested otherwise, there was no evidence of

the customer’s assertion being challenged or scrutinised. When the primary relied

on their own impression of the customer’s understanding, rather than carrying

out an objective assessment, even when the customer had no investment

experience at all, with very limited savings, there was no evidence on file of Mr

Allen challenging this as second level reviewer. This exposed customers to

significant risk.

4.62.
In order to provide Pension Transfer advice, Mansion Park had to carry out a

comparison between the benefits likely to be paid by the DBPS with the benefits

afforded by a personal pension. A TVAS Report facilitates this comparison as

required by COBS 19.1.2R(1). The main output from this document is a series of

percentages, known as Critical Yields. These illustrate the annual growth rate (net

of charges) that the customer would need to obtain on an investment of the CETV

in order to replicate the benefits provided by the Ceding Arrangement. The firm

must ensure that the comparison includes enough information for the customer

to be able to make an informed decision, drawing the customer’s attention to

factors that both support and detract from the firm’s advice, and take reasonable

steps to ensure that the client understands the comparison and advice (COBS

19.1.2(2) – (4)).

4.63.
In carrying out the second level review, Mr Allen should have taken steps to

ensure that the comparison had been adequately completed by the advisers and

that the TVAS included sufficient information for the customer to be able to make

an informed decision regarding a Pension Transfer.

4.64.
In 5 out of the 12 cases reviewed by the Authority in which Mr Allen completed

the second level review as PTS and which the Authority assessed to contain

unsuitable advice, the TVAS Report did not adequately compare the benefits likely

to be paid under the DBPS with benefits anticipated to be provided under the

Proposed Arrangement. The TVAS Reports failed to fairly present the comparison

or take into account the customer’s objectives so as to make the comparison

useful to the customer. Mr Allen carried out the second level review on customer

files which contained inadequate TVAS and allowed them to proceed through the

advice process.

4.65.
Errors in the TVAS Reports included using the incorrect Preferred Retirement Date

and not taking account of tax-free cash being, creating the risk that incorrect

Critical Yield figures were then provided to the customer. Where calculated to a

higher retirement age than desired by the customer, the Critical Yield figure will

be lower, suggesting the receiving fund does not need to perform as well. This

created a misleading picture about how the Ceding Arrangement and the Proposed

Arrangement compared, resulting in the customer not being in a properly

informed position with regard to the decision they were making.

4.66.
In the 5 files reviewed by the Authority where Mr Allen signed off on the advice

despite the primary adviser failing to carry out adequate TVAS in the TVAS Report,

the advice was deemed unsuitable by the Authority because, in each instance, the

customer was advised to transfer out of their DBPS despite the content of the

TVAS Report and its Critical Yield calculations not supporting the recommendation

to proceed with the Pension Transfer.

4.67.
The TVAS in the TVAS Reports and fund illustrations contained in 15 out of the 18

files reviewed by the Authority for which Mr Allen was the second level reviewer

did not include sufficient information to enable customers to make informed

decisions regarding whether to transfer out of their DBPS into the Proposed

Arrangement.

Unsuitable investment advice

4.68.
The suitability requirement in COBS 9.2.1R extends to the investment into which

the firm has recommended the customer should transfer his or her pension funds.

Just as the adviser must ensure the customer can bear the transfer risk, so they

must ensure that there is a reasonable basis for believing that the customer can

bear the risks associated with the chosen investment (COBS 9.2.1R(1)(a) and

4.69.
In 6 out of the 18 files reviewed by the Authority for which Mr Allen completed

the second level review as PTS, the Authority found that the investment advice

provided by advisers at Mansion Park was unsuitable, for reasons including that

the customers did not have the capacity to bear the investment risk associated

with the Proposed Arrangement.

Poor quality communications with customers

4.70.
The Authority’s Rules about the provision of information to customers ensure that

consumers have all the necessary information to make an informed decision and

are, ultimately, treated fairly. In 17 out of the 18 Sample Files reviewed by the

Authority where Mr Allen carried out the second level review, the advice failed to

adhere to the Authority’s Rules about the provision of information to customers.

Suitability Reports were not compliant with rules set out in COBS in 16 out of the

18 Sample Files reviewed by the Authority for which Mr Allen completed the

second level review as PTS.

4.71.
Additionally, Mr Allen signed off on files where the TVAS did not put the customer

in an informed position due to errors or gaps in certain information. In some files

Mr Allen signed off on it was unclear whether the primary adviser had taken steps

to ensure the customer understood the comparison between the benefits likely to

be paid and options available under the Ceding Arrangement and those benefits

and options available under the Proposed Arrangement, as set out in the TVAS

Reports.

5.
FAILINGS

5.1.
The regulatory provisions relevant to this Notice are referred to in Annex A.

5.2.
The Authority considers that, during the Relevant Period, Mr Allen breached

Statement of Principle 6, in that he failed to act with due skill, care and diligence

in carrying out the second level review of the Pension Transfer advice given to

customers by other advisers at Mansion Park. His failings meant that the advice

he reviewed and allowed to proceed through the advice process did not comply

with regulatory requirements and standards, which created a significant risk of

unsuitable advice being given to customers to transfer out of their DBPS.

5.3.
In particular, in the Sample Files reviewed by the Authority where Mr Allen had

undertaken a second level review of the advice given to customers by other

advisers at Mansion Park, the advice given:

a) was unsuitable because it included Personal Recommendations to customers

based on the flawed assumption that a transfer to meet their stated objectives

was in the customer’s best interests. In reality, many customers’ objectives

were either not realisable or financially viable, or could have been met by the

existing scheme;

b) did not assess, or give due consideration to, whether customers would be

reliant on the income from their DBPS or whether they could financially bear

the risks involved in a Pension Transfer. A reasonably competent adviser

should have known that, following the recommended transfer, customers’

retirement income would be dependent on the performance of the new

investment;

c)
advised clients with no source of retirement income other than their DBPS

and state pension, and who had cautious attitudes to risk, to give up their

guaranteed benefits without sufficient justification;

d) failed to properly assess whether the customer had the necessary experience

and knowledge to understand the risks involved in the Pension Transfer

recommended and failed to give due consideration to this where they did not;

e)
did not include adequate transfer analysis to compare the benefits likely to

be paid under the DBPS with benefits paid out under the Proposed

Arrangement or other pension scheme into which it was proposed that the

client should transfer; and

f)
included Suitability Reports with inadequate information about the possible

disadvantages of transferring out of the customer’s DBPS, having regard to

their specific circumstances and objectives. Although Suitability Reports

contained caveats and risk warnings regarding Pension Transfers, the

Authority considers that the Personal Recommendation was unclear and

risked being confusing for customers. The warnings and Personal

Recommendation to transfer were often contradictory, with no explanation.

The Suitability Reports were not, therefore, clear, fair and not misleading.

5.4.
As a consequence of his actions, Mr Allen failed to meet the regulatory standards

expected of a PTS performing a second-level review of pension transfer advice.

The Authority therefore considers that he is not fit and proper to perform any

function in relation to the regulated activity of advising on Pension Transfers and

Pension Opt-outs carried on by an authorised person, exempt person and exempt

professional firm.

6.
SANCTION

Financial penalty

6.1.
The Authority’s policy for imposing a financial penalty is set out in Chapter 6 of

DEPP. In respect of conduct occurring on or after 6 March 2010, the Authority

applies a five-step framework to determine the appropriate level of financial

penalty. DEPP 6.5B sets out the details of the five-step framework that applies in

respect of financial penalties imposed on individuals in non-market abuse cases.

Step 1: disgorgement

6.2.
Pursuant to DEPP 6.5B.1G, at Step 1 the Authority seeks to deprive an individual

of the financial benefit derived directly from the breach where it is practicable to

quantify this.

6.3.
The Authority has identified the following financial benefit that Mr Allen derived

directly from the breach:

a) Commission of £2,060.30 for second-level checks of DBPS Pension Transfer

advice provided by other advisers.

6.4.
83% of the Sample Files reviewed by the Authority, for which Mr Allen carried out

the second level review, did not comply with the Authority’s rules (12 out of 18

files contained unsuitable pension transfer advice and 3 out of 18 files contained

material information gaps such that a recommendation to transfer should not have

been made). However, the Authority also received parts of 5 customer files for

which Mr Allen carried out the second level review which were not reviewed using

the DBAAT and on which no findings have been made in relation to suitability.

Therefore, the Authority seeks to disgorge 65% of the commission received by Mr

Allen for second level-checks of DBPS Pension Transfer advice, which is £1,339.

6.5.
The Authority has charged interest on Mr Allen’s benefits at 8% per year from the

end of the Relevant Period to 4 April 2023, amounting to £567.38.

6.6.
Step 1 is therefore £1,906 (rounded down to the nearest £1).

Step 2: the seriousness of the breach

6.7.
Pursuant to DEPP 6.5B.2G, at Step 2 the Authority determines a figure that

reflects the seriousness of the breach. That figure is based on a percentage of

the individual’s relevant income. The individual’s relevant income is the gross

amount of all benefits received by the individual from the employment in

connection with which the breach occurred, and for the period of the breach.

6.8.
The period of Mr Allen’s breach of Statement of Principle 6 was from 8 June 2015

to 17 December 2017. The Authority considers Mr Allen’s relevant income for this

period to be £149,637.25.

6.9.
In deciding on the percentage of the relevant income that forms the basis of the

step 2 figure, the Authority considers the seriousness of the breach and chooses

a percentage between 0% and 40%. This range is divided into five fixed levels

which represent, on a sliding scale, the seriousness of the breach; the more

serious the breach, the higher the level. For penalties imposed on individuals in

non-market abuse cases there are the following five levels:

Level 1 – 0%

Level 2 – 10%

Level 3 – 20%

Level 4 – 30%

6.10.
In assessing the seriousness level, the Authority takes into account various factors

which reflect the impact and nature of the breach, and whether it was committed

deliberately or recklessly.

Impact of the breach

6.11.
Mr Allen’s breaches caused a significant risk of loss to individual consumers who

transferred out of their DBPS as a result of the unsuitable advice he reviewed. For

many customers, their DBPS was their most valuable asset (the average CETV

per customer was £268,000) and was, for many customers, their main retirement

provision (DEPP 6.5B.2G(8)(c)).

6.12.
Some of the customers affected were BSPS members, many of whom were in a

vulnerable position due to the uncertainty surrounding the future of the BSPS.

(DEPP 6.5B.2G(8)(d)).

Nature of the breach

6.13.
Mr Allen’s failings occurred over a prolonged period (two and half years). The

breach only came to an end when the Authority intervened in December 2017

(DEPP 6.5B.2G(9)(b)).

6.14.
Mr Allen is an experienced industry professional having worked in financial

services for over 20 years, working as a Financial Adviser and PTS, and yet

reviewed and signed off unsuitable advice which recommended to a large number

of customers that they should transfer out of their DBPS (DEPP 6.5B.2G(9)(j)).

Whether the breach was deliberate and/or reckless

6.15.
The breaches committed by Mr Allen were as a result of his serious lack of

competence, rather than deliberate or reckless acts (DEPP 6.5B.2G(11)) and there

was no attempt by Mr Allen to conceal the breach (DEPP 6.5B.2G(10)(a) and (d)).

Level of Seriousness

6.16.
Mr Allen did not fail to act with integrity or abuse a position of trust and has not

previously been disciplined by the Authority (DEPP 6.5B.2G.(9)(e) and (f)).

6.17.
DEPP 6.5B.2G(12) lists factors likely to be considered ‘level 4 or 5 factors’. The

Authority considers that the fact that Mr Allen’s breach caused a significant risk

of loss to customers is relevant (DEPP 6.5B2G(12)(a)).

6.18.
DEPP 6.5B.2G(13) lists factors likely to be considered ‘level 1, 2 or 3 factors’. The

Authority considers the fact that Mr Allen committed his breach negligently to be

relevant (DEPP 6.5B.2G(13)(d)).

6.19.
Taking all of these factors into account, the Authority considers the seriousness

of the breach to be level 3 and so the Step 2 figure is 20% of £149,637.25.

6.20.
Step 2 is therefore £29,927.45.

Step 3: mitigating and aggravating factors

6.21.
Pursuant to DEPP 6.5B.3G, at Step 3 the Authority may increase or decrease the

amount of the financial penalty arrived at after Step 2, but not including any

amount to be disgorged as set out in Step 1, to take into account factors which

aggravate or mitigate the breach.

6.22.
The Authority has considered whether any of the mitigating or aggravating factors

listed in DEPP 6.5B.3G, or any other such factors, apply in this case and has

concluded that none applies to a material extent, such that the penalty ought to

be increased or decreased. considers that the following factors aggravate the

6.23.
The Step 3 figure is therefore £29,927.45.

Step 4: adjustment for deterrence

6.24.
Pursuant to DEPP 6.5B.4G, if the Authority considers the figure arrived at after

Step 3 is insufficient to deter the individual who committed the breach, or others,

from committing further or similar breaches, then the Authority may increase the

penalty.

6.25.
The Authority considers that the Step 3 figure of £29,927.45 does not represent

a sufficient deterrent to Mr Allen or others, and so has increased the penalty at

Step 4. The Authority has taken particular note of the significant number of

customers who were advised to transfer out of their DBPS, the total value of the

pensions transferred and the number and value of claims The Authority therefore

has increased the Step 3 figure by a multiple of 4.

6.26.
Step 4 is therefore £119,709.80.

Step 5: settlement discount

6.27.
Pursuant to DEPP 6.5B.5G, if the Authority and the individual on whom a penalty

is to be imposed agree the amount of the financial penalty and other terms, DEPP

6.7 provides that the amount of the financial penalty which might otherwise have

been payable will be reduced to reflect the stage at which the Authority and the

individual reached agreement. The settlement discount does not apply to the

disgorgement of any benefit calculated at Step 1.

6.28.
The Authority and Mr Allen reached agreement at Stage 1 and so a 30% discount

applies to the Step 4 figure.

6.29.
Step 5 is therefore £83,700 (rounded down to the nearest £100).

Conclusion as to financial penalty

6.30.
Having applied the five-step framework set out in DEPP, the appropriate level of

financial penalty to be imposed on Mr Allen is £85,606.

6.31.
The Authority would have imposed a financial penalty of £121,606 on Mr Allen

(reduced to £85,606 as Mr Allen agreed to settle at an early stage of the

Authority’s investigation and therefore qualified for a 30% (stage 1) discount

under the Authority’s executive settlement procedures). However, the Authority

recognises that there is significant liability for redress for Mansion Park’s

customers which has fallen to the FSCS. The amount of liability as at 17 March

2023 was £2,988,898.02. Had it not been for the compensation limit of £85,000,

the total compensation available to customers would have been £5,322,495.71.

In these circumstances, the Authority has agreed with Mr Allen that that in lieu of

the imposition of a financial penalty, the sum of £85,606 be paid direct to the

FSCS to contribute towards any redress due to Mansion Park’s customers. This is

in furtherance of the Authority’s consumer protection objective. In light of the

above and taking into account the exceptional circumstances of the BSPS, the

Authority hereby publishes a statement of Mr Allen’s misconduct.

6.32.
The Authority’s policy in relation to the imposition of a public censure is set out in

Chapter 6 of DEPP. DEPP sets out non exhaustive factors that may be of particular

relevance in determining whether it is appropriate to issue a public censure rather

than impose a financial penalty. DEPP 6.4.2G (5) includes that it may be a factor

(depending on the nature and seriousness of the breach) in favour of a public

censure rather a financial penalty including but not limited to where a person has

taken steps to ensure that those who have suffered loss due to the breach are

fully compensated for those losses. Whilst the full amount of any losses due to Mr

Allen’s breaches are not yet quantified, they may be significant. In light of this,

and the FSCS having already paid out £2,988,898.02 to Mansion Park’s

customers, the Authority has agreed that the sums otherwise due as a financial

penalty should be paid direct to the FSCS.

6.33.
The Authority has had regard to the fact that Mr Allen has agreed to pay direct to

the FSCS assets that would otherwise be used to satisfy any financial penalty

imposed by the Authority to be used towards any redress due to Mansion Park’s

customers. On that basis, the Authority has not imposed a financial penalty on Mr

Allen but instead issues a statement of Mr Allen’s misconduct under section 66 of

the Act.

6.34.
The Authority has had regard to the guidance in Chapter 9 of EG in considering

whether to impose a prohibition order on Mr Allen. The Authority has the power

to prohibit individuals under section 56 of the Act.

6.35.
The Authority considers that Mr Allen lacks fitness and propriety in all the

circumstances, in particular relating to his lack of competence and capability for

the reasons set out above. Therefore, the Authority hereby imposes a prohibition

on Mr Allen from performing any functions in relation to the regulated activity of

advising on Pension Transfers and Pension Opt-Outs carried on by an authorised

person, exempt person or exempt professional firm.

7.
PROCEDURAL MATTERS

7.1.
This Notice is given to Mr Allen under sections 57 and 67 of the Act and in

accordance with section 390 of the Act.

7.2.
The following statutory rights are important.

Decision maker

7.3.
The decision which gave rise to the obligation to give this Notice was made by the

Settlement Decision Makers.

7.4.
Sections 391(4), 391(6) and 391(7) of the Act apply to the publication of

information about the matter to which this Notice relates. Under those provisions,

the Authority must publish such information about the matter to which this notice

relates as the Authority considers appropriate. The information may be published

in such manner as the Authority considers appropriate. However, the Authority

may not publish information if such publication would, in the opinion of the

Authority, be unfair to you or prejudicial to the interests of consumers or

detrimental to the stability of the UK financial system.

7.5.
The Authority intends to publish such information about the matter to which this

Final Notice relates as it considers appropriate.

Authority contacts

7.6.
For more information concerning this matter generally, contact Lisa Ablett at the

Authority (direct line: 0207 066 9886/email: Lisa.Ablett@fca.org.uk).

Financial Conduct Authority, Enforcement and Market Oversight Division

ANNEX A

RELEVANT STATUTORY AND REGULATORY PROVISIONS

The Financial Services and Markets Act 2000 (“the Act”)

The Authority’s operational objectives

1.
The Authority’s operational objectives are set out in section 1B(3) of the Act

and include securing an appropriate degree of protection for consumers and

protecting and enhancing the integrity of the UK financial system.

Section 56 of the Act

2.
Section 56 of the Act provides that the Authority may make an order prohibiting

an individual from performing a specified function, any function falling within a

specified description or any function, if it appears to the Authority that that

individual is not a fit and proper person to perform functions in relation to a

regulated activity carried on by an authorised person, a person who is an

exempt person in relation to that activity or a person to whom, as a result of

Part 20, the general prohibition does not apply in relation to that activity. Such

an order may relate to a specified regulated activity, any regulated activity

falling within a specified description, or all regulated activities

Section 66A of the Act

3.
Under section 66A of the Act, the Authority may take action against a person

if it appears to the Authority that he is guilty of misconduct and the Authority

is satisfied that it is appropriate in all the circumstances to take action against

him, including the imposition of a penalty of such amount as it considers

appropriate.

4.
Under section 66A of the Act a person is guilty of misconduct if, inter alia, he

at any time failed to comply with rules made by the Authority under section

64A of the Act and at that time was an approved person or had been knowingly

concerned in a contravention of relevant requirement by an authorised person

and at that time the person was an approved person in relation to the

authorised person.

RELEVANT REGULATORY PROVISIONS

The Authority’s Handbook of Rules and Guidance

5.
In exercising its powers to impose a financial penalty, the Authority must have

regard to the relevant regulatory provisions in the Authority’s Handbook of

rules and guidance (the “Handbook”). The main provisions that the Authority

considers relevant are set out below.

Statements of Principle and Code of Practice for Approved Persons

(“APER”)1

6.
The part of the Authority’s handbook known as APER sets out the Statements

of Principle issued under section 64 of the Act as they relate to approved

persons and descriptions of conduct which, in the opinion of the Authority, do

not comply with a Statement of Principle.

7.
APER further describes factors which, in the opinion of the Authority, are to be

taken into account in determining whether or not an approved person’s conduct

complies with particular Statements of Principle.

8.
From 8 June 2015 to 6 March 2016, Statement of Principle 6 stated that an

approved person performing an accountable significant-influence function must

exercise due skill, care and diligence in managing the business of the firm for

which he is responsible in his accountable function.

9.
From 7 March 2016 to 17 December 2017, Statement of Principle 6 stated that

an approved person performing an accountable higher management function

must exercise due skill, care and diligence in managing the business of the firm

for which they are responsible in their accountable function.

10.
‘Accountable higher management functions’ includes any accountable function

that is an Authority controlled function that is a significant influence function.

Significant influence functions include the following controlled functions: CF1

(Director), CF3 (Chief Executive), CF10 (Compliance Oversight) and CF11

(Money Laundering Reporting).

1 Where APER or COBS have been the subject of subsequent amendment they are stated as applicable during

the Relevant Period.

11.
APER 3.1.8AG provides, in relation to applying Statements of Principle 5 to 7,

that the nature, scale and complexity of the business under management and

the role and responsibility of the individual performing an accountable higher

management function within the firm will be relevant in assessing whether an

approved person’s conduct was reasonable.

12.
APER 3.3.1G states that in determining whether or not the conduct of an

approved person performing an accountable higher management function

complies with Statements of Principle 5 to 7, the following are factors which,

in the opinion of the Authority, are to be taken into account:

(1) whether he exercised reasonable care when considering the information

available to him;

(2) whether he reached a reasonable conclusion which he acted on;

(3) the nature, scale and complexity of the firm’s business;

(4) their role and responsibility as an approved person performing an

accountable significant-influence (in place until 6 March 2016) or higher

management (in place from 7 March 2016) function; and

(5) the knowledge he had, or should have had, of regulatory concerns, if any,

arising in the business under his control.

13.
APER 4.6 describes conduct which in the opinion of the Authority does not

comply with Principle 6.

14.
APER 4.6.2G provides that in the opinion of the Authority, conduct of the type

described in APER 4.6.3G, APER 4.6.5G, APER 4.6.6G or APER 4.6.8G does not

comply with Statement of Principle 6.

15.
APER 4.6.3G provides that failing to take reasonable steps to adequately inform

themselves about the affairs of the business for which they are responsible falls

within APER 4.6.2G.

16.
APER 4.6.4G provides that Behaviour of the type referred to in APER 4.6.3 G

includes, but is not limited to:

(1) permitting transactions without a sufficient understanding of the risks

involved;

(2) permitting expansion of the business without reasonably assessing the

potential risks of that expansion;

(3) inadequately monitoring highly profitable transactions or business

practices or unusual transactions or business practices; […]

17.
APER 4.6.5G provides that delegating the authority for dealing with an issue or

a part of the business to an individual or individuals (whether in-house or

outside contractors) without reasonable grounds for believing that the delegate

had the necessary capacity, competence, knowledge, seniority or skill to deal

with the issue or to take authority for dealing with part of the business, falls

within APER 4.6.2G (see APER 4.6.13G).

18.
APER 4.6.6G provides failing to take reasonable steps to maintain an

appropriate level of understanding about an issue or part of the business that

they have delegated to an individual or individuals (whether in-house or outside

contractors) falls within APER 4.6.2G (see APER 4.6.14G).

19.
APER 4.6.7G provides that behaviour of the type referred to in APER 4.6.6 G

includes but is not limited to:

(1) disregarding an issue or part of the business once it has been delegated;

(2) failing to require adequate reports once the resolution of an issue or

management of part of the business has been delegated; […]

20.
APER 4.6.8G provides that failing to supervise and monitor adequately the

individual or individuals (whether in-house or outside contractors) to whom

responsibility for dealing with an issue or authority for dealing with a part of

the business has been delegated falls within APER 4.6.2G.

21.
APER 4.6.9G provides that behaviour of the type referred to in APER 4.6.8G

includes, but is not limited to:

(1) failing to take personal action where progress is unreasonably slow, or

where implausible or unsatisfactory explanations are provided;

(2) failing to review the performance of an outside contractor in connection

with the delegated issue or business.

22.
In determining whether or not the conduct of an approved person performing

an accountable higher management function under APER 4.6.5G, APER 4.6.6G

and APER 4.6.8G complies with Statement of Principle 6, the following are

factors which, in the opinion of the FCA, are to be taken into account:

(1) the competence, knowledge or seniority of the delegate; and

(2) the past performance and record of the delegate.

23.
APER 4.6.13G (Delegation) provides, amongst other provisions, that:

(1) An approved person performing an accountable higher management

function may delegate the investigation, resolution or management of an

issue or authority for dealing with a part of the business to individuals who

report to them or to others.

(2) The approved person performing an accountable higher management

function should have reasonable grounds for believing that the delegate

has the competence, knowledge, skill and time to deal with the issue. For

instance, if the compliance department only has sufficient resources to deal

with day-to-day issues, it would be unreasonable to delegate to it the

resolution of a complex or unusual issue without ensuring it had sufficient

capacity to deal with the matter adequately. […].

Conduct of Business Sourcebook (“COBS”)

The client’s best interest rule

24.
COBS 2.1.1R:

(1) A firm must act honestly, fairly and professionally in accordance with

the best interests of its client (the client's best interests rule).

Communication is fair clear and not misleading

25.
COBS 4.2.1R:

(1) A firm must ensure that a communication or a financial promotion is

fair, clear and not misleading.

Assessing suitability: the obligations

26.
COBS 9.2.1R:

(1)
A firm must take reasonable steps to ensure that a personal

recommendation, or a decision to trade, is suitable for its client; and

(2)
When making the personal recommendation or managing his

investments, the firm must obtain the necessary information regarding

the client's:

(a) knowledge and experience in the investment field relevant to the

specific type of designated investment or service;

(b) financial situation; and

(c) investment objectives;

so as to enable the firm to make the recommendation, or take the

decision, which is suitable for him.

27.
COBS 9.2.2R:

(1) A firm must obtain from the client such information as is necessary for the

firm to understand the essential facts about him and have a reasonable

basis for believing, giving due consideration to the nature and extent of

the service provided, that the specific transaction to be recommended, or

entered into in the course of managing:

(a) meets his investment objectives;

(b) is such that he is able financially to bear any related investment

risks consistent with his investment objectives; and

(c) is such that he has the necessary experience and knowledge in order

to understand the risks involved in the transaction or in the

management of his portfolio.

(2) The information regarding the investment objectives of a client must

include, where relevant, information on the length of time for which he

wishes to hold the investment, his preferences regarding risk taking, his

risk profile, and the purposes of the investment.

(3) The information regarding the financial situation of a client must include,

where relevant, information on the source and extent of his regular

income, his assets, including liquid assets, investments and real property,

and his regular financial commitments.

28.
COBS 9.2.3 R:

The information regarding a client’s knowledge and experience in the

investment field includes, to the extent appropriate to the nature of the

client, the nature and extent of the service to be provided and the type

of product or transaction envisaged, including their complexity and the

risks involved, information on:

(1) the types of service, transaction and designated investment with

which the client is familiar;

(2) the nature, volume, frequency of the client’s transactions in

designated investments and the period over which they have been

carried out;

(3) the level of education, profession or relevant former profession of

the client.

29.
COBS 9.2.4 R:

A firm must not encourage a client not to provide information for the

purposes of its assessment of suitability.

30.
COBS 9.2.5 R:

A firm is entitled to rely on the information provided by its clients unless

it is aware that the information is manifestly out of date, inaccurate or

incomplete.

Insufficient information

31.
COBS 9.2.6R:

If a firm does not obtain the necessary information to assess suitability,

it must not make a personal recommendation to the client or take a

decision to trade for him.

Suitability reports

32.
During the Relevant Period COBS 9.4 set out the following rules and guidance

concerning Suitability reports.

33.
COBS 9.4.1 R:

A firm must provide a suitability report to a retail client if the firm makes

a personal recommendation to the client and the client:

(2) buys, sells, surrenders, converts or cancels rights under, or

suspends contributions to, a personal pension scheme or a

stakeholder pension scheme; or

(3) elects to make income withdrawals or purchase a short-term

annuity; or

(4) enters into a pension transfer or pension opt-out.

34.
COBS 9.4.7R:

The suitability report must, at least:

(1) specify the client's demands and needs;

(2) explain why the firm has concluded that the recommended

transaction is suitable for the client having regard to the information

provided by the client; and

(3) explain any possible disadvantages of the transaction for the client.

35.
COBS 9.4.8 G:

A firm should give the client such details as are appropriate according to

the complexity of the transaction.

Pension transfers, conversions, and opt-outs

36.
COBS 19.1 applies, with some exclusions, to a firm that gives advice or a

personal recommendation about a pension transfer, a pension conversion or a

pension opt-out. The following provisions of COBS 19.1 are set out as they

applied during the Relevant Period.

37.
COBS 19.1.2R:

A firm must:

(1) compare the benefits likely (on reasonable assumptions) to be paid

under a defined benefits pension scheme or other pension scheme

with safeguarded benefits with the benefits afforded by a personal

pension scheme, stakeholder pension scheme or other pension

scheme with flexible benefits, before it advises a retail client to

transfer out of a defined benefits pension scheme or other pension

scheme with safeguarded benefits;

(2) ensure that that comparison includes enough information for the

client to be able to make an informed decision;

(3) give the client a copy of the comparison, drawing the client's

attention to the factors that do and do not support the firm's advice,

in good time, and in any case no later than when the key features

document is provided; and

(4) take reasonable steps to ensure that the client understands the

firm's comparison and its advice.

38.
COBS 19.1.3G:

In particular, the comparison should:

(1) take into account all of the retail client's relevant circumstances;

(2) have regard to the benefits and options available under the ceding

scheme and the effect of replacing them with the benefits and

options under the proposed scheme;

(3) explain the assumptions on which it is based and the rates of return

that would have to be achieved to replicate the benefits being given

up;

(4) be illustrated on rates of return which take into account the likely

expected returns of the assets in which the retail client's funds will

be invested; and

(5) where an immediate crystallisation of benefits is sought by the retail

client prior to the ceding scheme’s normal retirement age, compare

the benefits available from crystallisation at normal retirement age

under that scheme.

39.
COBS 19.1.6G:

When advising a retail client who is, or is eligible to be, a member of a

defined benefits occupational pension scheme or other scheme with

safeguarded benefits whether to transfer, convert or opt-out, a firm

should start by assuming that a transfer, conversion or opt-out will not

be suitable. A firm should only then consider a transfer, conversion or

opt-out to be suitable if it can clearly demonstrate, on contemporary

evidence, that the transfer, conversion or opt-out is in the client's best

interests.

40.
COBS 19.1.7G:

When a firm advises a retail client on a pension transfer, pension

conversion or pension opt-out, it should consider the client’s attitude to

risk including, where relevant, in relation to the rate of investment growth

that would have to be achieved to replicate the benefits being given up.

41.
COBS 19.1.7AG:

When giving a personal recommendation about a pension transfer or

pension conversion, a firm should clearly inform the retail client about

the loss of the safeguarded benefits and the consequent transfer of risk

from the defined benefits pension scheme or other scheme with

safeguarded benefits to the retail client, including:

(1) the extent to which benefits may fall short of replicating those in the

defined benefits pension scheme or other scheme with safeguarded

benefits;

(2) the uncertainty of the level of benefit that can be obtained from the

purchase of a future annuity and the prior investment risk to which

the retail client is exposed until an annuity is purchased with the

proceeds of the proposed personal pension scheme or stakeholder

pension scheme; and

(3) the potential lack of availability of annuity types (for instance,

annuity increases linked to different indices) to replicate the

benefits being given up in the defined benefits pension scheme.

42.
COBS 19.1.8G:

When a firm prepares a suitability report it should include:

(1) a summary of the advantages and disadvantages of its personal

recommendation;

(2) an analysis of the financial implications (if the recommendation is to opt-

out); and

(3) a summary of any other material information.

Fit and Proper test for Employees and Senior Personnel (“FIT”)

43.
Guidance on the question whether an individual is a fit and proper person is

given in the part of the Handbook called the Fit and Proper Test for Employees

and Senior Personnel (FIT). FIT 1.3.1G states that the Authority will have

regard to a number of factors when assessing the fitness and propriety of a

person to perform a particular controlled function. The most important

considerations will be the person’s:

(1) honesty, integrity and reputation;

(2) competence and capability; and

(3) financial soundness.

44.
For the purposes of this Notice the only relevant consideration is (2)

competence and capability.

Enforcement Guide (“EG”)

45.
The Authority’s policy for exercising its power to make a prohibition order is

set out in Chapter 9 of EG.

46.
EG 9.2.2 states that the Authority has the power to make a range of prohibition

orders depending on the circumstances of each case and the range of regulated

activities to which the individual’s lack of fitness and propriety is relevant.

Depending on the circumstances of each case, the Authority may seek to

prohibit an individual from performing any class of function in relation to any

class of regulated activity, or it may limit the prohibition order to specific

functions in relation to specific regulated activities. The Authority may also

make an order prohibiting an individual from being employed by a particular

firm, type of firm or any firm.

47.
EG 9.2.3 states that the scope of the prohibition order will depend on the range

of functions which the individual concerned performs in relation to regulated

activities, the reasons why he is not fit and proper and the severity of risk

which he poses to consumers or the market generally. At EG 9.3.5(4) the

Authority gives a serious lack of competence as an example of the type of

behaviour which has previously resulted in the Authority deciding to issue a

prohibition order.

48.
EG sets out the Authority’s approach to taking disciplinary action. The

Authority’s approach to financial penalties is set out in Chapter 7 of EG, which

can be accessed here:

Decision Procedures and Penalties Manual (“DEPP”)

49.
Chapter 6 of DEPP, which forms part of the Authority’s Handbook, sets out the

Authority’s policy for imposing a financial penalty. The Authority applies a five-

step framework to determine the appropriate level of financial penalty. DEPP

6.5B sets out the details of the five-step framework that applies to financial

penalties imposed on individuals in non-market abuse cases, which can be

accessed here: