Phoenix Life Limited · DRN-6167559

The complaint Mr M has complained about the administration of a regular withdrawal he makes from a Self- Invested Personal Pension (SIPP) he holds with Phoenix Life Limited, trading as Standard Life. He’s said that, in the past 12 months, an incorrect amount has been paid on six occasions. There was also a time when his income payment was delayed. What happened The investigator who considered this matter set out the background to the complaint in his assessment of the case. I’m broadly setting out the same background below, with some amendments for the purposes of this decision. Mr M has a SIPP with Standard Life, from which he receives a regular income at the end of each month (28th). For the month of February 2025, there was a system issue with BACS which meant Mr M’s usual payment of £4,189 wasn’t received. When Mr M enquired about the matter, Standard Life couldn’t advise when this would be resolved. This payment ended up being made at the beginning of March 2025. Prior to payment being made, a formal complaint was lodged. Mr M said payment should be paid by CHAPS rather than BACS. At the same time, a query was raised around why Mr M had received £4,188.99 for some months when his income was set as £4,189. There was a shortfall of 1p. Standard Life issued a response in May 2025. At that point, Standard Life apologised for the delay in sending his income payment and said this was due to a technical issue which affected payments due to be paid on 28 February 2025. It said it was working closely with the relevant teams to monitor the incident and to take the necessary preventative action to help ensure it didn’t happen again. In relation to this issue, Standard Life made a payment of £75 to Mr M’s bank account. As to the issue Mr M raised regarding the income he received, and this being 1p short in some months, Standard Life advised that this was a result of “Notional Disinvesting”. It said that it needed to disinvest units, to allow his monthly income payment to be made. When this happened, rounding meant the payment could sometimes be 1p or 2p less than expected. It added that it would only deduct what Mr M had actually received in his bank account (from the disinvestment) as payment to him. Mr M responded to say that he wasn’t convinced by what he was told. He said the technical issue Standard Life had mentioned didn’t affect his partner’s income payment.

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In terms of the differing monthly income payments, Mr M said he was a former independent financial adviser (IFA), and at no point when his income was due to be paid had there been insufficient monies held in the SIPP bank account. So, Standard Life never had a need to disinvest funds to pay his income. He said Standard Life’s explanation around notional disinvestment in relation to his income payment didn’t make sense. He added that he wanted this to be investigated properly, and a response to his actual situation rather than what Standard Life did when a client had insufficient funds in their SIPP bank account to pay their monthly income. Standard Life then gave Mr M a detailed explanation of notional units within its internal pension funds. But Mr M told Standard Life that its explanation didn’t address his issue satisfactorily. It was on that basis that Mr M contacted our service. When doing so, Mr M advised that he didn’t believe Standard Life’s system couldn’t provide a regular income as required, its responses didn’t make sense, and that he would like Standard Life to waive all charges and rebate the last 12 months of charges. Having considered the matter, our investigator thought that Standard Life had done enough to resolve things, saying the following in summary: • With regard to the delayed income payment, Standard Life could have worded matters better in its final response to let it be known that Mr M’s income payment was one of many that was affected by the technical issue, rather than implying that it was an issue that affected all income payments. • Mr M’s income payment for the month of February 2025 was received on 1 March 2025. This was only one day later than expected. Mr M hadn’t told us he couldn’t cover important bills or that it had any particular detriment to any financial arrangements he had in place. Given that, the £75 compensation that had already been paid in relation to that issue was fair and reasonable. Had the issue persisted for longer than it did, it’s possible that a higher amount would have been recommended. • Mr M’s main issue related to the differing amounts he’d received from his income payments. As set out above, this was sometimes 1p short. In the final response letter, Standard Life said the following: “Regarding the small change in your payment. When you have income set up, some months you may receive 1p or 2p less – this is a result of Notional Disinvesting. We need to disinvest units, to allow your monthly payment to be made. When this disinvestment happens, rounding means the payment can sometimes be 1p or 2p less than expected, however, we will only deduct what you have actually received in your bank account (from the disinvestment) as payment to you.” • Standard Life had also provided further explanations about how its income payments work. On 2 June 2025, Standard Life said that: “ln order for us to record, value and track the movement of Self-Investment within our SIPP Product, Standard Life introduced the use of Notional Units within an SI fund. The “SI” Fund is held on our internal systems in exactly the same manner as all our other Internal Pension funds (SLIP Funds). Notional units are created whenever money is either applied directly into the “SI” fund (at the New Business stage) or

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switched into that fund from other SLIP funds. £1 invested into the “SI” fund initially creates 1 Notional Unit. Once a Notional unit has been created, the unit price then tracks the actual value of any Self- Invested assets plus the balance held in the SIPP Bank Account. For example:- £1,000 invested into SIPP Bank Account = 1,000 SI Notional units (Unit Price = 100p). If the £1,000 is then used to invest in Portfolio/Fund A and 2 weeks later A is worth:- £975.00, then 1,00 SI Notional Units (Unit Price = 975 /1 ,000 = 97.50p). £1,120.00, then 1,000 SI Notional Units (Unit Price = 1,120/1,000 = 112p) This creation of Notional Units applies to any increment invested in the “SI” fund. Therefore, as we know exactly the number of units held within each increment at any time, we can track precisely the proportion of the self-invested assets applicable to each Increment. The use of Notional Units also gives us the flexibility to alter the Pension State (i.e. from Pre to Post Pension) when moving into Income Drawdown. Pre-Pension notional unit holdings are converted into Post-Pension notional unit holdings, along with the cancellation of any units to cover appropriate payments of Tax Free Cash and/or income.” • Mr M had said that his funds were crystallised and the monthly payments he received were from the SIPP bank account, so although minimal, there should be no discrepancy in the payments he received. These comments had been put to Standard Life and it replied as follows: “In order for us to record, value and track the movement of Self-Investment, we need to use “notional units” within an “SI” fund. This is how our internal system works and can automate a payment to the client. While it’s accepted the cash balance isn’t an investment, we consider the SIPP bank account as a “SI” fund, so this would have a “notional value”. Therefore, whether a sale to raise the cash to pay the income is required or not is irrelevant. It’s the system functionality, and while there may be a small discrepancy to the actual value he has requested, we are processing Mr M’s instruction correctly and ensuring he receives a payment each month on the required day…the exact amount will pay some months and won’t impact every client…” • The investigator had considered Standard Life’s explanations, Mr M’s comments, and what he was looking for to resolve matters. Our service couldn’t dictate how a business chooses to operate. It would be up to Standard Life to run its business how it saw fit. It was entitled to do so as long as it complied with the required regulations. He was satisfied that it had, and with the explanation it had provided. • In terms of waiving charges and refunding what Mr M had paid over the preceding 12 months, the charges applied weren’t simply for processing income payments. There was far more that came with administering a pension. Given this, that course of action wouldn’t be fair.

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• It was understood that Mr M had a unique standpoint, given his employment history. But if Mr M wasn’t happy with how Standard Life processed the income payments, and he found the fact there may be times where his income payment was 1p short to be unacceptable, then he’d be entitled to find a platform that was capable of processing matters the way he wanted. A withdrawal being 1p or 2p short for several months wouldn’t warrant a separate payment of compensation. • Mr M had also compared the shortfall in his regular income with charges that had been taken for the use of a discretionary fund manager. He questioned why there were never any shortfalls of this for 1p or 2p. The investigator said that this would be a separate matter, but that any explanation for that wouldn’t affect the outcome of this complaint. Be he said that he could refer this point back to Standard Life if Mr M wished. Mr M disagreed, however, saying the following in summary: • There had been 27 income payments, with 10 of those being reduced by 1p or 2p. From January 2025 to July 2025, of the seven income payments received, six of these were reduced by the amounts noted above, however from August 2025 to January 2026 all six income payments showed no discrepancies. He hoped that the investigator would appreciate the real difficulty he had in understanding why, even with the explanation of notional units, there was no consistent process in place. • Standard Life’s explanation of Notional Units didn’t make sense, but it was perhaps the process which it had in place which was nonsensical, rather than the explanation, and it was assumed that it had simply cut and pasted the information from its documentation. • He accepted the comment that this service couldn’t dictate how Standard Life chose to run its business, however it should have in place a transparent and reasonable process which allowed it to pay the correct level of monthly income, given that this task would be one of the main focuses of all pension providers. • Mr M asked the investigator to direct him to the specific section of the WRAP/SIPP terms and conditions which explained the concept of notional units, along with the explanation that this process could reduce the income payments in some months. If there was no such documented explanation, then Standard Life wasn’t paying his income correctly as indeed it had suggested in its response to the investigator. This may be a breach of the requirements placed upon pension providers. • He didn’t agree that the fact that only other "fixed" withdrawals from the SIPP, namely the yearly Discretionary Managers Charge, yearly Pension Fund Withdrawals Charge and the yearly Charge for Pension Fund Withdrawal were being paid without reduction wouldn’t affect the outcome of his complaint. It was queried as to how Standard Life could apply a "rounding down" to income withdrawals, but never round down annual charges. • Mr M requested a clear explanation from Standard Life as to why it wasn’t consistent in "rounding" in relation to all withdrawals, and not just his income. The investigator replied as follows: • In terms of what Mr M had said about the terms and conditions, and whether they set out that there was a possibility of his income being 1p or 2p short in certain months,

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he agreed that they didn’t explicitly say this. But Standard Life had said that, as this wasn't something which impacted every customer, it wasn't set out in its terms and conditions. • Standard Life had explained how the process around withdrawals and notional units worked, but whilst Mr M was entitled to be unhappy with this, it wasn’t for our service to dictate how a business operates and the withdrawals would continue to be processed in this way. The withdrawals being 1p or 2p short hadn’t had a significant impact on Mr M and Standard Life had already paid £75 in respect of the one day delay in making the February 2025 payment. • He reiterated that he considered withdrawals and charges to be two separate issues, but said that he was happy to refer this back to Standard Life for an explanation on this. However, he didn’t believe that this would change the outcome of Mr M’s complaint, as this service couldn’t dictate how a business operates. As agreement couldn’t be reached on the outcome, it’s been referred to me for review. At my request, the investigator asked Standard Life for an explanation as to why charges were never rounded down. Standard Life replied as follows: • The system it used to facilitate Mr M’s income was historic and differed to the system it used to pre-populate the platform charges. This was why there was no requirement to rounding when platform charges were deducted from the platform. • It was satisfied that the charges that had been deducted were correct and as per its literature and within the terms of the contract, so Mr M had paid the charges he was expecting and required to pay. • Due to the introduction of its new “Aberdeen SIPP”, the income anomaly would in any case likely be corrected. What I’ve decided – and why I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. And having done so, I’ve reached broadly the same conclusions as the investigator, and for similar reasons. I’d firstly note that there’s been no financial loss to Mr M here. It’s my understanding that Mr M hasn’t actually had, for example, £4,189 deducted from his pension account, but has only been paid £4,188.99. As such, given that I think it’s unlikely that the absence of 1p or 2p per month on a sporadic basis will have impacted on Mr M’s financial circumstances, there nothing that Standard Life would need to put right in a financial sense. Mr M’s concerns remain around the explanation which he’s been given as to why this happens, and that there’s a disparity between the rounding down which occurs on his income payments and the lack of rounding down on the charges which are applied. To address the first issue, I understand that Mr M remains dissatisfied with the explanation

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provided, but given that the investigator has already asked Standard Life for its rationale for the occasional rounding down, there’s little which I think I could realistically do to obtain an alternative or better explanation, so as to satisfy Mr M’s requirements. As set out by the investigator, and accepted by Mr M in his response, this service can’t require Standard Life to change its internal practices. And given that it doesn’t appear to be causing Mr M financial disadvantage, there’s little more which I think I could meaningfully direct Standard Life to do here. As also set out by the investigator, however, if Mr M finds the practice to be unacceptable, it would be up to him to transfer his pension funds elsewhere. In terms of what Standard Life has said about the charges not being subject to the rounding, I’d refer Mr M to Standard Life’s comments above, in that the charges were taken under a different system, which wasn’t subject to the same “rounding”. Standard Life has confirmed, however, that Mr M has been charged correctly under that system. My final decision My final decision is that I don’t uphold the complaint. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr M to accept or reject my decision before 3 April 2026. Philip Miller Ombudsman

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