04689-15 Hardy v The Sunday Times

    • Date complaint received

      14th January 2016

    • Outcome

      Breach - sanction: publication of correction

    • Code provisions

      1 Accuracy

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seeking to withdraw between £40,000 and £45,000 from a £100,000 pension fund; she wanted to know if the money could be withdrawn tax-free.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.


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