Provided incorrect information - help, any ideas

Tommyjw

It is an odd situation and i could be wrong but i think those mentioning a partial return of the money are missing that it is a Serious Ill Health Lump Sum, that has to extinguish all rights , any amount left /returned to your account cancels it being a SIHLS entirely.. Therefore, it is pay the tax, or return the whole amount, from some combination of your own funds and the providers compensation amount *

* Which i agree with others is unlikely to be significant. Ultimately, tax is a personal affair and they are not an adviser, the defense will be they acted on your instruction and they likely have suitable comments in their terms/paperwork to say it is up to you to be sure. It is a simple google which shows only uncrystallised benefits are tax-free.

However, absolutely the complaints process should be followed in it's entirety (theirs & Ombudsmans) 

pterri

Try your MP? They are not all useless, honestly. Raising a question in the commons and/or behind the scenes letters to relevant ministers may help? It’s cost free if nothing else, although doesn’t sound like a quick process. Also, MPs can, I think, name and shame in the commons with some immature. It’s amazing what adverse publicity can do. Sounds cut and dried to me, especially as they appear to have admitted their fault. 

Culzean

xylophone said:

Thank you. It wasn't advice it was their misunderstanding of the tax treatment. As you see from my opening posts, nothing at all ambiguous in their instruction.

Wasn't it? 

But I was told (informally) that I might be able to take my SIPP tax free before I died if I was certified as having less than 1 year to live. I Googled it and it appeared to be the case. 

So I phoned my SIPP provider and initially they told me that they didn't believe I could take the money tax free as I had already drawn some of it. The person I was speaking to on the phone didn't sound too sure of himself and therefore I asked if he could check and put it in writing. Some days later I received an email which said 
"I have been asked to contact you regarding a potential serious ill health payment. 
This is to confirm that if you receive a serious ill health payment, this will be paid tax free, regardless of whether funds are crystallised or uncrystallised. 
In order to take a serious ill health payment we will require the attached form to be completed by yourself and a medical practitioner. Once returned we will send this to our technical team to sign off on the payment."

I am assuming that the telephone call was recorded?

You were unsure.  You asked for clarification of the position not unreasonably expecting your provider to know the answer.

The person to whom you spoke checked  with "higher authority" (presumably the person authorised by the firm to answer such queries correctly)  and provided you with misleading information which can be construed as advice.

I notice that poster "Voyager" says

but that is only going to happen if the OP makes a complaint and also makes whatever efforts are reasonable under the circumstances to reverse the mis-advised transaction.

It seems to me  that the provider  went beyond their authority and (although not deliberately)  they made a mistake which has 

caused you immense distress and worry at a time when you are very vulnerable.

Their professional indemnity insurance exists to cover professional mistakes.

I find it very concerning that the provider is simply telling you to deal with the consequences of an error for which the firm is 

responsible.

Your last months with your family should not be overshadowed by this debacle.   I wonder whether it would be worth drawing 

Steve Webb's attention to the matter?

https://uk.linkedin.com/in/steve-webb-1714b54

https://www.thisismoney.co.uk/profile-1383/steve-webb.html

Well it was advice of course but I was responding to a previous point I think which spoke about advice or they simply didn't give the correct instruction. I think I might be splitting hairs.

I'm sure the call was recorded but it was the letter that I received that I then acted upon. There can be no denial of their wrongdoing and I can quite easily demonstrate that I would never had considered touching my SIPP (which I haven't for nearly 2 years) given that a) I had absolutely no financial need to do so and b) I totally understood my wife would receive the monies, tax free in a few months anyway. I am drafting a doc now to respond to the SIPP provider and I am asking them if they really think I would have withdrawn anything had it not been presented to me as tax free.

There is Steve Webb, there is also the Money Mail chap and also the Sunday Times Personal Finance man and I guess a whole raft of others. I am holding off on that avenue and trying to negotiate this with the SIPP provider (for what I'm not sure but there is likely to be some tax to pay as I'm not sure I can get all the £300,000 together) but if that fails then how do I chose which to go to? Or do I go to them all and see which one runs with it? If I go that route how would that impact on anything I do with the Ombudsman ... it's all very confusing but more than that it feels like I have been put in a position where I am going to have to make some tough decisions and take some risks (which I simply didn't want or expect)  
  

xylophone

Well it was advice of course but I was responding to a previous point I think which spoke about advice or they simply didn't give the correct instruction. I think I might be splitting hairs.

How are you splitting hairs?

The case seems quite clear?

Is it advisable to take any action at all other than seeking help when you are in such a state of uncertainty?

xylophone

And should the provider be reported to their regulator for (at the least) failure to ensure that their employees are properly trained?

xylophone

Ultimately, tax is a personal affair and they are not an adviser,

So that they should have told the OP this at the outset?

Instead, fully knowing the OP's situation, the person who took the original enquiry consulted with (presumably) the relevant department/team and came back with a response in writing which led the OP to take action on that response.

In effect they gave advice they were not qualified or authorised to give?

They made a professional mistake so should look to their PI company?

Tommyjw

xylophone said:

Ultimately, tax is a personal affair and they are not an adviser,

So that they should have told the OP this at the outset?

Instead, fully knowing the OP's situation, the person who took the original enquiry consulted with (presumably) the relevant department/team and came back with a response in writing which led the OP to take action on that response.

In effect they gave advice they were not qualified or authorised to give?

They made a professional mistake so should look to their PI company?

They likely did tell OP, in the terms the OP signed up for when he set up the SIPP, and on likely many other kinds of paperwork since.

Of course they didn't give advice in the proper sense, they are literally not adviser ,they literally cannot give advice. A customer service agent is not qualified to give advice and the Ombudsman would never hold them to that standard. 

This would never go to their insurance, everyones knows this, it is not worth repeating and does nothing but give people false hope.  

I am being realistic and telling OP what happens in the real world, in the real world the Ombudsman tells providers to offer to put someone in the position they would have been in had the error not occured and to pay good will compensation to cover any distress e.g. in the £100's or low thousands  the provider has offered that ,  and i amsure would cough up a reasonable compensation amount if e.g. there are penalties for getting money out of investements to give it back. Likewise, if pushed, they may offer an increased e.g. a £1000 or £2000 compensation amount.

But like another posted said, they absolutely will not and will never cough up £60k or anything remotely close to it. It won't happen. It is silly to claim it would. The starting basis should be dvising the OP what is actually possible in the real world.

Culzean

pterri said:

Try your MP? They are not all useless, honestly. Raising a question in the commons and/or behind the scenes letters to relevant ministers may help? It’s cost free if nothing else, although doesn’t sound like a quick process. Also, MPs can, I think, name and shame in the commons with some immature. It’s amazing what adverse publicity can do. Sounds cut and dried to me, especially as they appear to have admitted their fault. 

I am not sure that I have the time for this and it just opens up another front that I simply don't have the bandwidth to deal with

xylophone

Of course they didn't give advice in the proper sense, they are literally not adviser ,they literally cannot give advice. A customer service agent is not qualified to give advice 

Exactly so.

The agent did not give advice. He/she was unsure of the position and consulted presumably the person in the organisation tasked with answering such queries.

The OP received a written response to his query.  Was it open to interpretation? Ambiguous? It certainly gave the OP the impression that he was able to take the money tax free.

He acted on that response and he acted to his detriment. 

BUT THE PROVIDER SHOULD HAVE REPLIED THAT THEY COULD NOT OFFER ADVICE/COMMENT ON HIS QUERY BEYOND STATING THAT IF UNSuRE HE SHOULD TAKE ADVICE FROM A QUALIFIED PERSON.

Why should this terminally ill man suffer for the provider's error?

Culzean

[Deleted User] said:

This is a horrible situation to be in.  I have huge sympathy and hope that it can be sorted.  But I want to explain why it is worse than £60,000 and that it might be in your best interests to get as much as possible repaid. You and your family definitely should not be in this position though.

Dazed_and_C0nfused said:

I don't know for certain where they have got the £60k figure from but the real tax liability is more likely to be well in excess of £100k.

Hopefully someone will be able to provide more info about the potential for this to be treated as non taxable.  If there is any scope for this.

£60,000 is basic rate only tax.  But as Dazed says, the real tax liability (PAYE plus self-assessment) will be over £100,000 (and it could be £125,000 or more if you have state pension and other income).

Some people might say that it is the SIPP provider that is reponsible for paying the PAYE to HMRC and they can go and whistle for it.  While that is right, the SIPP provider would have a common law right to reclaim any PAYE from you / your estate (there is a tax case called McCarthy vs McCarthy Stone on this).  So that says you would still have to pay £100,000+ of tax.  It's not a good answer.  I can't see a SIPP provider writing off the PAYE, let alone the rest of the tax.

My experience of normal situations is that HMRC are unlikely to let you (or your estate) off any tax due. They have a duty to collect this tax.  But I don't have experience of your specific fact pattern though.  Even if HMRC did, it will be a long process getting them to agree,

I doubt that the SIPP provider will make you whole for the tax you paid.  This will be a huge expense for them (more than PAYE, especially if it should be grossed up to deal with the tax on tax).  If you are lucky (with the pressure, publicity, etc) it might happen.  But I suspect it is unlikely.

So I end up saying it's in your interest (and the beneficiaries of your estate) to repay as much of the money as you can so that bit can be unravelled. This would be horrible for you and a lot of hassle (e.g. borrowing from the kids, dealing with the bureaucracy in trying to get the fixed term deposits back - which may just not happen, trying to borrow from a bank - the interest cost is way cheaper than the tax).  I'd love to be able to say fight it, but I suspect at the end of the day that would be a difficult process.

If there is still a shortfall (and you get enough publicity / pressure) you might be able to persuade the SIPP provider to lend any shortfall to your wife (with her giving the money to you) and that being used by you to repay the shortfall.  This would all be cash-less.  This can then be repaid back by your wife with the tax-free proceeds when she inherits your pension after your death.  The SIPP provider will hate this.  However, if you can get enough publicity / pressure on them it might work.

I can't think of anything practical otherwise from a tax perspective.  Sorry.

I thought I answered this, if I'm doing so twice my apologies. 

From the outset yesterday I haven't had any thoughts of not paying the tax. I accept it will need to be paid if I cannot repay the sum in full. But it appears the SIPP provider simply want to wash there hands of it, 'bung' me £500 to keep quiet and that simply isn't going to happen.

I have gifted and spent a significant amount (why wouldn't I?) but I can trawl other savings and ISA's and get somewhere close to repaying the full amount but I still expect to have a shortfall of £10-£40K. There's not a hope in hell I'm asking the SIPP provider to lend me the money. The tax liability is the undeniable result of their bad advice and I cannot believe that I should be expected to be out of pocket for a financial institution not giving me the correct information. As far as I'm concerned I'll get together every penny I can and any tax due as a result of not repaying in full then they can pay

I've gathered myself from yesterday, I've drafted what I think is a fair and constructive response to the SIPP provider and my real uncertainty now is, in the event that they refuse to compensate me for the remaining tax liability then do I go the Ombudsman route or the Journalist route? Maybe I can do both but I fear the Ombudsmen may be less sympathetic to my case if I hand it over to a hack looking for a story