Decision of the Complaints Committee 04689-15 Hardy v The
Sunday Times
Summary of complaint
1. Mike Hardy complained to the Independent Press Standards
Organisation that The Sunday Times breached Clause 1 (Accuracy) of the Editors’
Code of Practice in an article headlined “‘Petrifying’ advice given on
pensions”, published in print and online on 12 April 2015.
2. The article reported the findings of an undercover
“mystery shopper” investigation into pension advice offered by firms following
changes to pension rules. A journalist telephoned a number of financial advice
firms posing as an unemployed client who was seeking to withdraw between
£40,000 and £45,000 from a £100,000 pension fund; she wanted to know if the
money could be withdrawn tax-free. Amongst those whose responses the article
criticised were those of the complainant, the managing director of a company
contacted by the journalist.
3. The article reported that the complainant “appeared to
tell the reporter that there would be no tax implication if she withdrew 45% of
her pension pot” whereas “in reality, most pensions allow people to withdraw
only 25% of their fund tax-free, with the remainder being subject to income
tax”. The journalist said that the
complainant had said, in answer to her question about whether she would be
subject to income tax if she were to withdraw £40,000 to £45,000, that “if [she
wasn’t] taking any income, [she] wouldn’t be subject to income tax. That
wouldn’t be relevant.” It also said he told her that “provided [she was]
entitled to tax-free cash, which [she] should be, 25% of the value of [her]
pension, there wouldn’t be any tax”. It stated that the complainant had been
“repeatedly told that the reporter’s pot was £100,000”; £40,000-£45,000 would
amount to 40%-45% of the total value of the pension, which was greater than the
tax-free 25% the complainant had previously cited.
4. The article was also published in the same form online.
5. The newspaper provided a recording and transcript of the
complainant’s conversation with the journalist. In response to the journalist’s
wish to withdraw £40,000-45,000 from her pot of £100,000 the complainant said
it “should be technically possible, but in order for us to do that there’s a
process that we have to go through which would set out how you could achieve
[this]”. He said that he would need her to provide him with authority to
contact her pension provider so that he could put together a report about her
scheme before being able to recommend a specific course of action. The
complainant asked whether the journalist wanted to “take an income as well or
[…] just […] get the money”; the journalist confirmed that she only wanted to
withdraw the money. The complainant informed her that “because of the new rules
that have just come out” her pension provider might say to her that “the only
way [they] can help [her] is to give [her] all of [her] money back, 25% of it
tax-free cash, and the remainder to be added to [her] income”.
6. The journalist asked for clarification on what it meant
for money to be “added to [her] income”, and informed the complainant that she
was not working, and had no income. The complainant said that she would get
“£10,600 tax-free and the remainder would be taxed at … yeah, you’d have a
little bit of it that would go into the higher rate tax band”. The journalist
asked the complainant what the implications would be if she took out the money
immediately. The complainant told her that this would be covered in the report,
and that “before we advised you to do anything, you would be fully aware of the
implications of whatever it is that we’re advising you to do”.
7. After the journalist confirmed that she would like to
engage the complainant’s services, she asked for further clarification on the
complainant’s reference to “higher rate tax”; she said that she did not “want
to take an income [and] just want[ed] to take some money out”. The complainant
told her that “if you weren’t taking any income, you wouldn’t be subject to
income tax. So, that wouldn’t be relevant”. The journalist then asked “if I’m
just taking out £40,000-£45,000 from my pension this year, I won’t be subject
to any income tax?” The complainant told her “provided you’re entitled to
tax-free cash. Which you should be, 25% of it, of the value of your pension,
then it would be, there wouldn’t be any tax to pay”. The journalist asked the
complainant again: “so if I take out £40,000-£45,000 […] I won’t have to pay
any tax on that?” The complainant informed her that “I can’t commit to saying
that definitely now because I haven’t contacted your pension scheme, but in
principle that sounds right. Most pension schemes will provide up to 25%
tax-free cash. Some pension schemes will provide more than that”.
8. The complainant also told the journalist that part of the
investigative process would be to “establish how much tax-free cash you’re
entitled to, but, er, most schemes it would be 25% of the value of the
pension”. The journalist asked if “[the pension provider says] it’s 25% of the
value of the pension, you think I can still take out £40,000-£45,000 tax-free,
potentially?” The complainant answered: “yes, I’m talking in general terms
here, again, because I haven’t contacted your scheme, I don’t know anything
about your pension scheme”. The journalist emphasised that it was important to
her not to pay any tax, and again sought confirmation that this “would be
possible”, to which the complainant replied “yes”.
9. The complainant said that the article’s reference to
pension “advice” inaccurately suggested that he had given regulated financial
advice over the phone to the reporter. He argued that he had not offered any
recommendations or judgements as to a proposed course of action and had not
therefore said anything which would have been recognised as “financial advice”
by the Financial Conduct Authority; he had simply given factual information to
the journalist based on what she had told him about her pension fund.
10. The complainant also said that it was inaccurate for the
article to suggest that the information he had given the reporter had been
misleading. It was not controversial to tell the reporter that she would not
have to pay income tax if she was not receiving an income. If the reporter was
entitled to tax-free money, she would not have to pay income tax on her
withdrawal. During the course of their conversation, the complainant had made
clear that in most circumstances, people seeking to withdraw money from their
pension would only be entitled to withdraw 25% tax-free, in addition to the
standard tax-free allowance (£10,600). There are circumstances in which people
can withdraw a higher percentage of their pension tax-free; such circumstances
are not particularly rare or unusual. It was on this basis that he had informed
the reporter that she could be entitled to withdraw the entire sum tax-free. He
also made clear that in order to be able to tell her with certainty the exact
amount of tax-free money she could withdraw, he would have to obtain the full
details of her pension from her provider, and write a report.
11. At the time of the conversation, the complainant said he
had been suspicious that the potential client he was speaking to was in fact a
journalist. He said that he had therefore been particularly mindful not to
provide inaccurate information. He provided a screenshot of a message he had
posted on Twitter after the conversation, in which he had suggested that he
knew that he had been speaking to a journalist.
12. The newspaper said that it was not misleading to report
that the complainant had given the reporter “advice” over the telephone. While
it accepted that the term “advice” has specific definitions under FCA
guidelines, the term had simply been used to describe the information given by
the complainant to the reporter. Further, the person who had directed the
journalist’s call to the complainant had referred to him as the firm’s
“adviser”. In any case, the complainant had given regulated “advice” according
to the newspaper’s interpretation of the FCA guidelines on the matter.
13. The newspaper argued that the advice given was
misleading. In the vast majority of cases, only 25% of a person’s pension fund
can be withdrawn tax-free. An additional £10,600 could then potentially be
withdrawn tax-free as it falls within the personal allowance, and the rest
would be subject to income tax at 20%. This would mean that the journalist
would be entitled to withdraw £35,600 tax-free; the additional money withdrawn
would be taxed at 20%. It is only in very rare circumstances that these figures
would not apply. It was therefore not realistic for the complainant to suggest
to the journalist that it was likely she could withdraw £40,000 to £45,000
without any tax implications.
14. The newspaper acknowledged that the complainant had said
during the conversation that he was unable to say with certainty what the
journalist’s entitlement to tax-free money would be without contacting her
pension provider; however, it took the view that the conversation as a whole
would have left a potential client with the unrealistic impression that £40,000
to £45,000 could be withdrawn tax-free.
15. Nonetheless, in an effort to resolve the complaint, the
newspaper offered to expand the online article to include a statement provided
by the complainant. The statement would reflect more explicitly that the
complainant would not have made any specific recommendations to a potential
client without first contacting their pension provider. The newspaper also
offered to publish the following clarification in print in its “Corrections and
Clarifications” column, and online beneath the article:
An article about pensions advisers reported advice Mike
Hardy of Abacus Advice Limited had given to the mystery shopper. Mr Hardy has
asked us to clarify that he would not have made any specific recommendations
without full investigation of the prospective client's existing pension
arrangements.
Relevant Code Provisions
Clause 1 (Accuracy)
i) The Press must take care not to publish inaccurate,
misleading or distorted information, including pictures.
ii) A significant inaccuracy, misleading statement or
distortion once recognised must be corrected, promptly and with due prominence,
and – where appropriate – an apology published. In cases involving the
Regulator, prominence should be agreed with the Regulator in advance.
Findings of the Committee
17. The Committee recognised the public interest in
conducting mystery shopper exercises in order to investigate and expose
impropriety, particularly when such impropriety could have an impact on the
vulnerable. The new tax arrangements were potentially complicated, and there
was consequently a need for the public to be able to easily access clear,
accurate advice. The newspaper was entitled to criticise the conduct of the
pension advisers on the basis of the information gathered by the journalist, given
the potential risks, but was obliged to do so in a manner that was not
misleading.
18. It was not misleading to describe as “advice” the
information given by the complainant in response to the journalist’s specific
requests. The complainant was described as an “adviser”, by his firm when first
contacted on the telephone by the mystery shopper. Although the term “advice”
has a technical meaning in the context of financial regulation, the information
provided by the complainant about the potential implications for her financial
position – in response to the journalist’s inquiries – was reasonably defined
as “advice”. There was no breach of Clause 1 on this point.
19. The transcript showed that the journalist told the
complainant straight away that she wanted to withdraw £40,000-£45,000 from a
£100,000 pension pot. It also showed that on four occasions when the mystery
shopper reiterated her request to withdraw £40,000-£45,000 tax-free, the
complainant suggested that might be possible.
20. However, the transcript also showed that on a number of
occasions the complainant qualified his advice by explaining that he would need
her authority to contact her pension scheme so as to be able to give advice
based on the terms of her policy, without which he could not advise her
specifically on the course of action she should take.
21. The transcript also revealed that the only specific
percentage to which he referred was 25% and that he never referred to a figure
of 45%.
22. The Committee emphasised that the newspaper was entitled
to take the view that the complainant’s responses to the journalist’s inquiries
were open to criticism, provided that that criticism was not based on factual
inaccuracy.
23. The article claimed that the complainant “appeared to
tell the reporter that there would be no tax implication if she withdrew 45% of
her pension pot”. The Committee concluded that that gave a misleading
impression of their conversation as a whole, which was not remedied by the use
of the word ‘appeared’. The complainant never specifically advised that she
could withdraw 45% of her pension fund tax-free; had he done so this would
plainly have been “bad” advice. He never referred to a percentage of 45% at all
but repeatedly explained that, generally, the amount of money which could be
withdrawn tax-free would be 25%.
24. Further, the complainant had told the journalist several
times that he would need to contact her pension provider before being able to
say for certain how much she was entitled to withdraw tax-free. There was no
reference in the article to this repeated qualification.
25. The failure of the article to refer to the complainant’s
repeated qualification or to the fact that he had only ever referred to 25% of
the money being tax-free amounted to a failure to take care not to publish
misleading information in breach of Clause 1(i).
26. Given the trenchant criticism of the advice given, this
misleading impression was significant. The newspaper had offered a
clarification during IPSO’s investigation of the complaint; however, in the
Committee’s view, the wording offered was insufficient to comply with the
newspaper’s obligations under Clause 1 (ii) as it failed to clearly identify
the misleading information published.
Conclusions
27. The complaint was upheld.
Remedial Action Required
28. The Committee required the publication of a correction.
The newspaper had already offered to publish a clarification in print and
online which restated that the complainant would have contacted the
journalist’s pension scheme before giving her any specific advice. However, the
wording offered did not identify the misleading information published. The
newspaper should therefore include in the published correction the fact that
the complainant had not told the journalist that she could withdraw 45% of her
pension fund tax-free. The correction should appear beneath the online article
and in its Clarifications & Corrections column in print, and should explain
that the correction is being published following a ruling by IPSO.
Date complaint received: 22/07/2015
Date decision issued: 14/01/2016