Is this Fair?

polybear

In mid 1998 i joined my employer's pension scheme, after receiving compensation for being mis-sold a personal pension. About 6.5K of the money had to go into AVC's. It went to Equitable Life, though I didn't know this at the time. The problems:

1. I asked for the money to be split 75% With profits; 25% Managed. My employer put it all in With Profits.

2. Whilst employees paying regular AVC's were warned by the company re: E.L., I received no warning because I had paid a lump sum only (I had no idea that AVC's were even invested in an outside company, let alone E.L - the first warning I got was an annual statement in July 2001 from E.L - the only one I ever got, incidentally!!)

3. My employer ditched E.L as our AVC provider and went to another company. I decided to transfer my money from E.L to the new company. However, my transfer sum was by this time subject to a 20% reduction on the With Profits fund (i.e. 20% of all my money - it should have been 20% of 75% of my money, had things been invested correctly at the outset....)

4. The transfer to the new provider was in March 2002; the sum transferred was £5300. Bearing in mind the E.L statement dated July 2001 was £7800 I was a bit upset, to say the least...

5. Ever since, I've been chasing my employer's pension scheme for compensation, based on the following:
(a) The money was incorrectly invested in the first place.
(b) The With Profits fund was subjected to a 20% reduction in transfer fee (went from 10% to 15% then 20%). Had I received earlier warning (like other employees did)then the losses could have been minimised.
(c) Potential for growth of the increased sum with the new AVC provider since 2002, had everything gone as it should have (i.e. correct investment of original lump sum plus increased transfer fee because I would have been warned sooner).

6. They've just come back to me saying that they've paid an extra £1200 into my AVC account as compensation; they could'nt get any info from E.L so have based it on their own calculations (which I don't know).

My question is this - How on earth do I decide if this is a fair offer please? I'm hoping someone out there can advise me (in simple language please!). Thanks.

EdInvestor

6. They've just come back to me saying that they've paid an extra £1200 into my AVC account as compensation; they could'nt get any info from E.L so have based it on their own calculations (which I don't know).

I suggest you ask them for a breakdown.

Your losses of 32% would appear to consist of

a) the 16% cut in overall policy values imposed on 16 July 2001

plus

b)the 20% market value adjuster (MVA) imposed on exiting the WP fund in early 2002

minus

c) the 4% increase in non-GAR policy values given under the compromise deal in late 2001.

A key factor would be when the company found the new AVC provider and moved the other staffers out, but not you: was it before or after the 16% cut in policy values?

polybear

Thanks for the reply. I've done some more digging and have found that the company warned the other employees twice prior to the 16% reduction. By my calculations I would have incurred the 15% transfer penalty imposed on 16 March 2001, but not the 16% reduction or the additional 5% transfer penalty (i.e. increased to 20%) imposed on 1 July 2002.

I don't know the difference in fund performance between the With Profits and Managed Funds over the period of my E.L. AVC (July 1998 to March 2002 - though I would have transferred sooner - say April/May 2001) so have had to assume they were the same. In addition, whilst I know that the transfer penalty for the With Profits Fund was (should have been) 15% for me, I don't know if there was any transfer penalty for the Managed Fund. Assuming there wasn't, then I think that the transfer value should have been approximately £1700 higher than it was.

In addition, whilst the company has offered £1200, I should have had £1700 extra in March 2002, invested in my new AVC Provider. Now to find out what that would be worth today.....

Polybear

polybear

I've just spent much of the day doing calculations and composing an email to my Pensions Dept. I've demonstrated that I should be subjected to a transfer penalty (of 15%) on the With-Profits part of my fund only; the 16% reduction should not be applied. Taking into account post-transfer investment performance also, I reckon they still owe me another 1400 quid.....

Polybear

EdInvestor

The performance on the managed fund and WP fund should have been very similar: though there were bonuses removed from the latter after the House of Lords judgment in July 2000, but single digit IIRC.There would have been no MVAs imposed on managed fund investments at any time.

I've demonstrated that I should be subjected to a transfer penalty (of 15%) on the With-Profits part of my fund only; the 16% reduction should not be applied. Taking into account post-transfer investment performance also, I reckon they still owe me another 1400

Sounds good to me, best of luck.

polybear

thanks for the reply - I'll let you know the outcome!!

Polybear