Baker Hughes Uk Retirement Savings Plan · CAS-53733-D7N9

CAS-53733-D7N9

Ombudsman’s Determination Applicant Mr S

Scheme Baker Hughes UK Retirement Savings Plan (the Plan)

Respondents Aviva

Outcome

Complaint summary

Background information, including submissions from the parties On 18 March 2020, Mr S telephoned Aviva saying that his Plan value had fallen by £6,700 in the last month and he felt it had a duty to proactively inform him of this. In response, Aviva directed him to its website so he could switch his investment fund to one with a lower risk. Aviva explained that the fall in value was due to volatility within the market. Mr S was not satisfied and raised a complaint.

On the same day, Mr S opted to switch out of the Balanced fund and invest in the Cash fund, which was within a lower risk category. Aviva actioned the switch the next day, on 19 March 2020.

On 19 March 2020, Aviva provided its final response to Mr S’ complaint, it stated that the Plan value was not guaranteed, but was instead subject to fluctuations within the financial market and could go up or down. The news of coronavirus spreading across more countries had caused concern as to how the world economy would be CAS-53733-D7N9 impacted. This led to a significant fall in the stock market which impacted the value of Mr S’ pension as his investment was linked to these markets. The Plan offered different funds he could invest in, and he was able to regularly track the performance of his funds online.

On 20 March 2020, Mr S telephoned Aviva and explained that he had switched to the Cash fund, but his account was still showing him as being invested in the Balanced fund.

On 23 March 2020, Aviva provided Mr S with a breakdown of the trade switch. It stated that the request for the switch was placed at 4:07 pm on 18 March 2020 and went to the market on 19 March 2020 using the price from that day. The unit price for the Balanced fund was 0.9405 and the unit price for the Cash fund was 1.0180.“Going to the market” is covered in the Plan’s investment brochure to help investors understand which price would be taken when they are buying or selling within the market. Aviva tends to value funds at the end of each business day using the most recent price available, these prices will not necessarily be the dealing prices as most funds are priced on a forward basis.

In response Mr S requested answers to the following questions: -

• Why had the value fallen by £1,200 between when he had requested the switch and its completion?

• When had Aviva sold the Balanced fund units?

• When had Aviva purchased the Cash fund units?

• He also asked Aviva to provide the unit prices for both funds for 18, 19, and 20 March 2020.

On 1 April 2020, Aviva responded to Mr S’ request for information. It said that there was no delay in the implementation of the requested switch. Mr S had invested into insured funds, so any trade request made after 9:05 am would go to market the following morning. The sale of the Balanced fund units and the purchase of the Cash fund units took place at the same time, using the unit price from 19 March 2020. The Balanced fund units were sold at 0.9405, its price on 18 March 2020 was 0.9835. The Cash fund units were purchased at 1.0180, the price on 18 March 2020 was the same.

2 CAS-53733-D7N9 On 2 April 2020, Mr S responded stating that the delay in Aviva making the trade had caused him to lose 4% more from the value of his Plan. His total loss amounted to £7,000. His funds had been mismanaged and he expected Aviva to choose funds and manage pensions better than this.

On 27 April 2020, Mr S wrote to Aviva saying that he had spoken to Aviva both before and after his funds were switched. During a telephone conversation, he was “guaranteed” that the unit values used to calculate the trade would be at the best price and would not decrease in the time taken to complete the switch. He asked a copy of the call recording in which the above conversation occurred.

In response, Aviva provided Mr S with the requested call recording and confirmed that its stance on Mr S’ complaint had not changed. It explained that any trade request would go to market the next morning after it was made, so there was no delay in the timing of Mr S’ requested fund switch. To prevent people from “playing the market”, it does not backdate or provide best-price fund switches. The call recording was unclear, Aviva was unable to identify where its representative had agreed that Aviva would backdate the fund switch. It accepted the call was not up to its normal customer service standard and said the representative would be given feedback to improve their service.

On 22 June 2020, Aviva outlined the findings of its investigation and concluded that it does not provide financial advice or manage funds so could not make Mr S aware of how market movements might affect his Plan value. During the pandemic the market had dropped drastically and there was no evidence that the decrease in value of Mr S’ investment was due to anything other than the market dropping.

Adjudicator’s Opinion

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I note the additional points raised by Mr S, but I agree with the Adjudicator’s Opinion.

Ombudsman’s decision

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I do not agree that Aviva’s information led Mr S to incur a loss of £1,000. I agree with the Adjudicator that the Balanced fund lost value due to fluctuating market movements which caused the value of Mr S’ overall investment to decrease. Once Mr S requested the switch trade Aviva correctly upheld the standard industry practice of ‘forward pricing’ which means any instruction to buy or sell an investment is held alongside many others and the price achieved is determined later (usually once a day). This means that a member would not know exactly how many units they would receive for their investment, or how much money would be achieved from a sale until the transaction has been priced. This method is an essential practice utilised to avoid price manipulation within the financial industry.

Therefore, I do not uphold Mr S’ complaint.

Anthony Arter

Pensions Ombudsman 12 October 2022

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