Mis-sold pension mortgage

timesup

Hubby took out pension mortgage and life insurance cover with General Accident through a local IFA in October 1986 - this was to cover £30,000 mortgage on his 60th b/day ( Oct 2012) and give him small pension.
Have just discovered before Christmas 2011 that Aviva - most recent company to take over from General Accident - are unable to give us any idea of benefits due till 6 months before 60th.
However, in 2002 (when mis-sold endowments were all in the news) when Norwich Union were in charge (having taken over from General Accident) I enquired how much we would receive, and they said a guaranteed fund of £39,000. At this time I thought 'Great' - enough money in pot to pay off the capital when 25 year mortgage is up.
Apparently this will not be so as it would seem that we can only take 25% of this as the lump sum!
The original firm that sold this policy to us no longer exists and I feel that being young and naive, we were mis-sold this pension mortgage. Husband was at that time and has been since - self employed and always in work - so adverse to any risk.
Wrote to Aviva beg January saying that as they took over from Norwich Union and prior to them - CGU then General Accident - surely they must take liability for General Accident who were the original providers of this pension mortgage. But they wipe their hands of it, saying it was the IFA.
Seems that regulations were brought in to cover the mis-selling of Endowments etc by independent companies - from 1988.
As this was in 1986 - I don't know where to turn to next.
Surely we aren't the only ones in this situation?
Any advice here would be so welcome - I'm finding it difficult to sleep at night.

dunstonh

Hubby took out pension mortgage and life insurance cover with General Accident through a local IFA in October 1986 - this was to cover £30,000 mortgage on his 60th b/day ( Oct 2012) and give him small pension.

Can you verify the date. Personal pensions didnt exist until 1988. Prior to that you had retirement annuity contracts and whilst theoretically they could work with a mortgage, the way the lump sum was paid (3 times the annual annuity until Govt changed the rules in 2006) would not normally be suited for mortgage repayment. Although technically, if set up correctly it could. Also, IFAs didnt exist in 1986. They came about n 1988 with polarisation.

However, in 2002 (when mis-sold endowments were all in the news) when Norwich Union were in charge (having taken over from General Accident) I enquired how much we would receive, and they said a guaranteed fund of £39,000. At this time I thought 'Great' - enough money in pot to pay off the capital when 25 year mortgage is up.

I would be surprised if Aviva said £39,000 guaranteed. Investments rarely carry any guarantees. Only if it was a conventional with profits plan with a basic sum assured to which bonuses were added would that be possible on a 1986 plan. Or if there was a guaranteed minimum maturity value (not seen them with Aviva personally but have seen retirement annuity contracts elsewhere with them).

Apparently this will not be so as it would seem that we can only take 25% of this as the lump sum!

The 25% rule was introduced in 2006. Prior to that it was 3x the annual annuity.

The original firm that sold this policy to us no longer exists and I feel that being young and naive, we were mis-sold this pension mortgage. Husband was at that time and has been since - self employed and always in work - so adverse to any risk.

It is almost certain that by modern standard the plan would not have been sold correctly. However, we are looking at pre-regulation when rules didnt exist. So, that makes it harder to say mis-sale as you cant break rules that did not exist at the time.

Wrote to Aviva beg January saying that as they took over from Norwich Union and prior to them - CGU then General Accident - surely they must take liability for General Accident who were the original providers of this pension mortgage. But they wipe their hands of it, saying it was the IFA.

Which is totally correct. The insurer has no liability for what your husband was told. They just received an application in the post and they acted on that application. The liability is with the company that sold it.

Seems that regulations were brought in to cover the mis-selling of Endowments etc by independent companies - from 1988.

No. Regulation came in during 1988. Nothing to do with endowments or independent companies. It covered financial services virtually across the board. It is a line in the sand though as pre 1988 cases give no consumer protection if the firm was not tied to an insurer.

Any advice here would be so welcome - I'm finding it difficult to sleep at night.

Unfortunately, there is nowhere you can go. It was pre-regulation and nothing you can do with regards to any complaint.

On the positive side you have the following things:
1 - the 2006 rule change to 25% on retirement annuity contracts means that the lump sum could well be bigger than the pre 2006 rules.
2 - with your husband being self employed (which means lower state pensions), he would almost certainly have more than £39000 in his pension. A self employed person with less than £120k at retirement has actually gone backwards and failed to plan (£120k is the amount required to make up for lost state pension that an employed person would get). So, if you take 25% of £120k plus, that should repay the mortgage
3 - you have known about this for a long time so you have had a chance to plan for it. The things that have caused investment returns to be lower have meant that mortgages and living costs have been lower. So, the excess income you have had could easily make up the shortfall.
4 - inflation has eroded the value of the debt in real terms but also means the pension contributions should have gone up periodically to cover inflation. Hopefully, you have done this and again, that should make finding the money a lot easier.

So, as long as you have done the basic things above which most people do, then you shouldnt have a problem. If you havent, then it could be.

Have just discovered before Christmas 2011 that Aviva - most recent company to take over from General Accident - are unable to give us any idea of benefits due till 6 months before 60th.

for reference, yes they can. They cannot give you exact but they can give the current position and a projected example using assumed rates (which may or may not turn out to be right)

holly_hobby

Your hubby would probably have been self employed (or may have had no access to an occupational scheme) at the time he effected the policies. The contract will be a RAC or "S226" policy with the accompanying pension life cover "S226a" policy - premiums payable under such contracts attracted tax relief at his highest rate.

As Duns. states pre 2006 the TFC was apx 1/3 of the fund - pension simplification changed this - which in itself does not mean the original pension policy was mis-sold, simply that subsequent goverment and HMRC regulations have altered the landscape (which is always a risk with any investment that attracts tax relief at source).

Sales pre 29 April 1988 are not regulated under the FSA - but this does not mean there were no rules and it was a simply a "free for all", just that the adviser did not have to demonstrate a duty of care to ensure suibability of the contract i.e did it meet your attitude to risk, what other provision did you have etc.

However, neither could they make any mis-leading statements with regards to the terms of the contract or returns. So yes there could be a basis of complaint, if your Hubby is able to prove he was mis-lead with regards to the basis and/or terms of the contract.

However, it appears that your complaint is one of performance i.e loss of expectation, which naturally cannot be compensated for.

The provider (now Aviva) will only investigate and compensate if a rep of one of their incorporated companies (ie GA in this case) sold the policy, which does not appear to be the case.

If the broker is still active, you could approach them, or if they have gone, you could approach the FSCS - however this would be on a complaint based on misrepresentation (under the Misrepresentation Act 1967) , not performance - which are 2 very different things !

You should be able to obtain projected EMVs - the 6 mth period is to do with calc of a final fund value - which naturally can't be done until near the point of vesting (pension payment).

Hope this helps

Holly