Mis-Sold Section 32?

xylophone

I hope you will let us know the outcome.

Fabius

Hi,

From your post #13 it appears that you receive Limited Revaluation on the GMP to age 60.

pensionsadvisoryservice(dot)org(dot)uk(slash)workplace-pension-schemes(slash)final-salary-schemes(slash)revaluation

Because of this, the amount of your GMP isn't known until it becomes due as future revaluation depends on increase to NAE (section 148 orders), which isn't known in advance.

It's likely that you transferred in service in addition to the GMP. A section 32 HAD to guarantee to provide the revalued GMP liability of the transferring scheme as a minimum at age 60 (females).

So the insurance company gave you a projection that showed what it thought the total transfer value might be (in 1988 this would have been a lot more than the reality) and the pension that this would purchase. This would have covered the expected revalued GMP with plenty to spare (at that time projections tended to run with 8% and 13% or close to future rates of investment return and annuity rates were much higher than the 5% capped revalued GMP). It would have looked like a very attractive proposition.

In reality the returns that underpinned these projections have not been seen. You now find yourself in the position where the value of the fund that Aviva holds in your policy most likely won't be enough to purchase the revalued GMP for you at age 60. Therefore you only get the revalued GMP and Aviva has to put its hand in its pocket to fund the difference between the cost of it and the fund value available (because it guaranteed that as a minimum). There are thousands and thousands of people in the same position unfortunately.

To clear up/reaffirm a couple of other points:
Recently altered state pension ages have no effect on the date that GMP is liable from (60 for women, 65 for men)
pre '88 GMP for females doesn't pay a widower's pension; it will die with you
pre '88 GMP escalation in payment is not paid by Aviva but it is provided through an increase to your state pension. This is too complicated for here but if you want to get an understanding then go here

pensionsadvisoryservice(dot)org(dot)uk(slash)workplace-pension-schemes(slash)final-salary-schemes(slash)annual-increases# (first FAQ)

I am sure that the letter from Aviva will confirm that you will receive the revalued GMP at age 60. If it doesn't then you need to query why but I'll literally eat my hat if that is the case (I worked at the Ombudsman and dealt with quite a number of cases about Norwich Union and others' Section 32 contracts so I know them quite well).

If you want to complain about the advice to effect the transfer in the first place then you can do that, the Financial Ombudsman Service website has plenty of information about the pension review and the complaints process on its website. I'd rate your chances of success at less than 20% but it'll cost you nothing but time and a few stamps to try.

Apologies for the (dots) and (slashes), I'm not trustworthy enough to post actual links apparently.

bilbo51

http://www.pensionsadvisoryservice.org.uk/workplace-pension-schemes/final-salary-schemes/annual-increases#

I get 404 not found on that link...

xylophone

I get 404 not found on that link...

http://tpas.amaze.com/workplace-pension-schemes/final-salary-schemes/revaluation

bilbo51

xylophone wrote: »

http://tpas.amaze.com/workplace-pension-schemes/final-salary-schemes/revaluation

Interesting.

Q2 of the Q&A says:

I left my contracted in scheme in 1987 having completed over 20 years service. I have just come to retire and have been told only a small part of my pension has increased. How can this be?

and the answer is:

As you left service between 1986 and 1991, only those benefits built up after 31 December 1984 have to be revalued. Any pension you built up before that date will not be revalued.

So someone in this situation transferring a final salary scheme to a S32 in say 1987, having contributed to that scheme for say 10 years would seem to get very little in the way of revaluation, which seems scandalous... or have I got it wrong?

Fabius

bilbo51 wrote: »

which seems scandalous... or have I got it wrong?

You are not the only person to think that it is (was) scandalous.

That's why successive defined benefit regime changes placed much stricter, and more financially demanding, obligations on these schemes [schemes that no employer was ever actually obliged to offer] until, quelle suprise, they stopped offering them.

Worth pointing out that the revaluation of that part you talk about from the FAQ is only the excess over the GMP.