A Summary of FOS Pensions & Investments Adjudications (Jan 2024 – May 2025)
Executive Summary: The Three Critical Takeaways
Analysis of over 2000 recent Financial Ombudsman Service (FOS) adjudication decisions combined with profiling from FCA and website marketing data reveals a challenging landscape for advisers. Complaint volumes are rising, driven partly by Claims Management Companies (CMCs), and the financial consequences of getting advice wrong have never been higher. For busy IFAs and Compliance Officers, the data and trends distill into three critical points:
- Certain Permissions and Business Models Drive Risk: The strongest predictor of upheld complaints per advisor is not the nature of the advice, but whether a firm has permission to hold client money and the complexity of its complaint mix. Firms with client money permissions—such as DFMs, platforms, and hybrid operators—consistently show higher rates of upheld complaints, reflecting greater operational risk. Similarly, a high proportion of “other pension” complaints is a statistical warning flag, often indicating more complex or legacy business and a greater likelihood of future upheld cases.
- Defined Benefit (DB) Transfers are the Greatest Financial Risk: While investment advice complaints are more numerous, upheld DB transfer complaints result in dramatically higher redress amounts. The median redress may be a few hundred pounds, but the average is skewed by six-figure awards, posing an existential threat to firms.
- Documentation is Your Primary Defence: In almost every scenario, from “insistent clients” to risk profiling, the FOS decision hinges on the quality of the firm’s records. Clear, contemporaneous documentation that demonstrates a robust and client-centric process is the most effective way to defend a complaint.
This document breaks down the key data, highlights the most common failings with real-world examples, and provides a checklist of best practices to mitigate risk.
The Big Picture: Complaint Volumes & Outcomes
The overall trend is one of consistent pressure. FOS saw a 49% increase in new complaints in H2 2024 compared to the previous year. While much of this was in banking, DC pensions and investment complaints rose counteracting a tail off in DB pensions cases.
- Uphold Rates are High: Across pensions and investment cases, the uphold rate is significantly higher than the FOS average. The sample data shows an uphold rate of ~46%.
- DB Transfers are Scrutinized Heavily: This category sees the highest uphold rates, often between 60-70%.
- CMC-driven Complaints: While CMCs are driving volume, their complaints have a lower success rate (~25% upheld) than those brought directly by consumers (~37% upheld). This suggests many are speculative, but firms must still have a process to handle them efficiently.
Why Complaints are Upheld: The Most Common Failings
The data provides a clear picture of what the FOS considers to be poor practice. Firms must focus their compliance efforts on these key areas.
1. Unsuitable Advice
This is, by a wide margin, the most frequent reason for an upheld complaint, with over 600 cases in the analysis falling into this category. It is the root cause of most high-value redress awards.
Chart based on FOS Financial Advice Claims Analysis, Jan 2024 – Apr 2025
Example: The British Steel Pension Scheme (BSPS)
A recurring scenario involves BSPS members who were advised to transfer out. One FOS decision cited a 41-year-old client who was “worried and unsettled.” The adviser facilitated the transfer, but FOS found the advice unsuitable, breaching rules on treating customers fairly (Principle 6) and clear communication (Principle 7). The firm’s defence that the client was insistent was dismissed.
Actionable Insight: The suitability of advice must be demonstrably in the client’s best interests. This requires a deep understanding of their circumstances, objectives, and a thorough analysis of alternatives.
2. The ‘Insistent Client’ Trap
A common but often unsuccessful defence is that “the client wanted to do it.” The FOS and FCA take a dim view of this argument, especially for high-stakes decisions like DB transfers.
FOS Position on Insistent Clients
Unless the formal insistent client process is followed perfectly, the defence is unlikely to succeed. Even then, FOS can still uphold a complaint if the outcome was foreseeably harmful. An adviser’s professional duty may require them to refuse to transact, rather than facilitate a poor decision.
Actionable Insight: Use of the insistent client process as a way to abdicate responsibility results in a low likelihood of success. For high-risk transactions, the safest course of action for the firm is often to decline the business. Ensure any insistent client interaction is meticulously documented, including a clear written recommendation *against* the course of action.
3. Inadequate Risk Profiling & Due Diligence
Many complaints centre on a mismatch between the client’s risk profile and the recommended investment. This is particularly acute where non-standard or unregulated assets are involved.
- Risk Mismatch: Cases are frequently upheld where cautious clients are placed in high-risk portfolios.
- Unregulated Investments: Complaints involving unregulated assets to cautious clients held within a SIPP are almost always upheld. SIPP operators and advisers are expected to conduct thorough due diligence on both the investment and any unregulated introducers.
Case Study: The ‘Execution-Only’ Defence
The data shows a stark contrast between firms. Options UK Personal Pensions (formerly Carey Pensions), which frequently accepted business from third-party unregulated introducers who provided advice to clients to move into unregulated investments facilitated by Options UK. Complainants had a 100% uphold rate in the 167 cases adjudicated in the period. They also recently (May 2024) lost a Court of Appeal JR against the FOS, the court found they had breeched their duty to act honestly, fairly and professionally in respect of due dilligence on introductions to unregulated firms/investments. In contrast, Hargreaves Lansdown, whose platform business rarely involves these factors, saw the vast majority of its execution-only complaints rejected. This illustrates that the FOS looks at the substance, not the label.
Actionable Insight: Risk profiling is more than a questionnaire. It requires a documented conversation. Firms must have a robust due diligence process for all products, and an explicit policy to avoid unregulated investments and introducers unless a compelling, documented case can be made.
4. Poor Communication & Disclosure
Failures to adequately disclose fees, charges, or risks are a common thread in upheld complaints. The introduction of the Consumer Duty raises this bar even higher, requiring communications that consumers can genuinely understand.
Example: Misleading Comparisons
In pension switching cases, the FOS will uphold a complaint if an adviser failed to justify why moving to a more expensive pension was beneficial, or if they downplayed exit penalties. Similarly, with DB transfers, if a “critical yield” analysis showed an unrealistic required growth rate (e.g., 8%+), the adviser must prove they hammered home how unlikely this was.
Actionable Insight: All client communications, especially suitability reports, must be clear, fair, and not misleading. Document that you have explicitly discussed downsides, risks, and costs.
Key Data Insights & Visuals
Defined Benefit Pensions Advice Carries Financial Risk
While the median redress award across all categories is low (around £400-£500), the potential losses from unsuitable DB transfer advice are enormous, as shown by the average (mean) redress amounts.
Chart based on FOS Financial Advice Claims Analysis, Jan 2024 – Apr 2025. Note: This shows the mean (average) award, which highlights the impact of high-value outliers.
Mean Redress for DB Pensions
£28,457
Mean Redress for Investment Advice
£4,165
Maximum DB Redress in Sample
£415,000
This demonstrates the “long tail” of risk. A single upheld DB transfer complaint can represent a signicant risk to a small firm.
The Danger of Latent Complaints
The negative consequences of poor advice are not always immediately obvious, especially with pensions.
Chart based on FOS Financial Advice Claims Analysis, Jan 2024 – Apr 2025
- DB Pensions: The uphold rate for complaints made 10-15 years after the advice is nearly 90%.
- Investment Advice: The uphold rate is highest in the first 2 years and then declines.
Actionable Insight: This is a critical risk management point – complaints can surface over a decade later and are still very likely to be upheld. Understanding the tail risk is challenging and a careful understanding of PII run-off cover may be valuable.
Complaint Adjudication Volumes Over Time
DB Pension transfer cases are tailing off and are now a lower-volume issue. Investment Advice cases are broadly stable while Other Pension complaints has a broad upward trend. There is a notable spike in decisions for both these latter categories in March 2025 (there is a similar spike in March 2024), which could suggest some seasonality. In some part this is the result of the conclusion of a set of cases featuring Zurich and Options clients. Zurich and Options UK’s upheld cases all relate to putting clients into the wrong pension structure or high-risk investments—usually citing “execution-only” type defences.
Chart based on FOS Financial Advice Claims Analysis, Jan 2024 – Apr 2025
Firm Features Associated with Upheld Complaints
Further analysis of firm characteristics and marketing approaches offers valuable insights into which types of advice businesses are statistically more likely to attract and ultimately lose FOS complaints. Three notable features emerged from the data, each with practical implications for compliance and operational risk management.
Client Money Permissions: A Structural Risk Signal
Firms with regulatory permission to hold client money show a significantly higher incidence of upheld complaints per advisor. This permission is uncommon among traditional IFAs, who typically never take custody of client assets. Instead, it is more often found in discretionary fund managers, platforms, and multi-service or vertically integrated firms. The additional operational complexity and regulatory requirements around client money management appear to translate directly into a higher risk of complaints being upheld. For compliance teams, this permission should be regarded as a risk indicator requiring robust systems, controls, and oversight.
Website Messaging: Lifestyle and Inheritance Focus
The strength of “lifestyle improvement” and “inheritance” themes in a firm’s public marketing are both negatively correlated with upheld claims per advisor. In other words, firms placing greater emphasis on helping clients improve their lifestyle or plan for intergenerational wealth transfer tend to face fewer upheld FOS complaints per advisor. While the statistical association is strongest for “lifestyle improvement” and only marginal for “inheritance,” both effects suggest that client bases attracted by these messages may have more realistic expectations, or that such firms operate with greater care and professionalism. However, these are associations rather than causations, and cannot be relied upon as a primary risk management tool.
Complaint Mix: The “Other Pension” Warning Sign
Firms with a high proportion of upheld complaints classified as “Other Pension”—those not relating to standard investment advice or defined benefit transfers—have the highest statistical likelihood of further upheld claims. This category often includes non-standard, complex, or legacy pension products where the scope for client misunderstanding, poor documentation, or unsuitable advice is greatest. The presence of a substantial “Other Pension” caseload should be seen as an indicator of heightened regulatory risk, warranting detailed file reviews and enhanced oversight.
In summary, operational permissions, marketing focus, and complaint composition can all provide meaningful, early-warning indicators of where upheld FOS claims are most likely to arise. Compliance leaders should consider these features when prioritising internal reviews and resource allocation. Iterestingly firm size and firm age are not predictive of claims per advisor – compliance risk comes in all shapes and sizes.
Best Practice Checklist for IFAs & Compliance
1. Reinforce Suitability Processes.
- ✓Create in-house data-warehouse functionality to understand concentrations and provide insights into where risks might lie. Consumer Duty, PROD, and the DB Transfer Finalised Guidance (FG21/3) all expect firms to understand concentrations of risk (products, types of business, advisers).
- ✓Always document a thorough analysis of alternatives, especially for pension transfers (Mandatory under COBS 19.1B – pension transfer suitability).
- ✓Where possible, articulate the counterfactual: “Without implementing Recommendation X, the client will not achieve Objective Y, due to [explain risk, shortfall, or limitation of alternatives].”
2. Strengthen Risk Profiling & Due Diligence.
- ✓Separate ‘risk appetite’ from ‘capacity for loss’ and document both. FCA’s Finalised Guidance (FG21/1, FG21/3)
- ✓Maintain an approved product list. Scrutinize any non-standard investment with a formal, documented due diligence process.
- ✓Have a default policy to reject business involving unregulated introducers unless rigorous due dilligence and “positive vetting” is in place. FCA Dear CEO letters and SIPP reviews have explicitly criticized firms who don’t do this.
3. Manage ‘Insistent Clients’ and Service Boundaries.
- ✓Establish a clear, firm-wide policy on high-risk insistent client transactions (consider refusing them).
- ✓Ensure staff are trained to maintain a clear boundary between advised and non-advised services.
- ✓Meticulously document any insistent client case with written warnings and client acknowledgements.
4. Bolster Record-Keeping.
- ✓Retain advice files indefinitely. Digital storage is cheap; redress is not.
- ✓Implement a system of peer review or second-pair-of-eyes checks for all high-risk advice before it is finalised.
- ✓When a complaint is received, prepare a comprehensive file with a clear narrative and all supporting evidence.
5. Embed the Consumer Duty.
- ✓Use datawarehouse concentration and complaint data as a key input for your Consumer Duty board reports and reviews. Evidence of management engagement is key to defence of Consumer Duty claims – good organisation and analysis of your date is essential. AI tools can make this a lot easier.
- ✓Proactively review client outcomes through statistical analysis as well as case based, benchmark against peers where possible. Don’t wait for complaints to identify potential areas of harm.
- ✓Ensure all communications are designed to be understood by the target audience, do sample testing to prove this is the case, and empower them to make good decisions.
By focusing on these core areas, firms can build more resilient processes, deliver better outcomes for clients, and be in a much stronger position to defend their advice when it comes under scrutiny.
