Mistake with annuity, what do I do?

Mrs_Mum99

I appointed an IFA to handle my annuity purchase. I gave him all the details of the pension fund, including the fact that there is a GMP. He looked at annuity providers and gave me quotes. I took a flat pension with no spouse's pension. Now it turns out I can't have that as my pension fund say the annuity has to rise by 3% pa and have a spouse's pension. The IFA says he told the annuity provider there was a GMP and they said it was no problem? The IFA has complained to the annuity provider who are looking into it. Do I just wait or do I need to do anything?
Thanks

warwicktiger

How far along the process have you got? Just done quotes?

Mrs_Mum99

No, my pension fund has gone across to the annuity provider from the pension fund, they are now stipulating what sort of pension I can have.

xylophone

http://www.pensionsandannuities.co.uk/Guaranteed_minimum_Pension_GMP.htm
http://www.barnett-waddingham.co.uk/news/2012/07/what-is-a-gmp/

Mrs_Mum99

Thanks.
My problem is that I accepted the level annuity found by my IFA and took my lump sum. The pension fund has gone to the annuity provider, but my old company are telling the annuity provider I can't have the level annuity I signed up for, only a much smaller escalating pension with spouse benefit. The reason I appointed an IFA is because I wanted someone who knew what they were doing and who could get me a higher annuity.
The annuity company told the IFA that the GMP was no problem apparently. They are talking to my old company to see if rules can be varied. In the meantime I have no annuity. I believe this is misselling??

warwicktiger

Assuming that there is enough in the fund to provide the GMP with 3% escalation and 50% spouses benefit the the annuity will have to be re-written, reducing the pension payable.

I would describe it as a ---- up or negligence rather than mis-selling, a term which has become associated with deliberate sharp practice.

mania112

Are you sure the original scheme are not just warning you that you will lose GMP on transfer?

Did the original scheme pay the lump sum, or the new annuity provider? Was the amount paid 25% of the total value?

I can't think of a situation where the Annuity HAS to provide those benefits, but the IFA should have made it clear that the Annuity will provide you with different (and worse) benefits than you would have had if you stayed - presumably so that you had a higher income.

To reference my point: one can transfer their GMP to a personal pension, losing the 'guarantee' but securing its cash equivalent transfer value, leaving you with a pot of cash you can do what you like with. I'm sure this is always possible with an annuity purchase too.

Perhaps the issue is the IFA chose OMO rather than IVP.

jamesd

Best not to use that misselling word, it'll set the wrong tone for what you need.

For some background you might want to read this and for more extensive detail, this paper. mania112 did a nice description of some options.

Part of the money might not be covered by the GMP requirements, which only apply to money paid in between 1988 and 1997, so a partial transfer solution might be viable.

Give it time for things to be worked through, it'll probably take a few weeks at least. If the delay is causing you hardship to the can't buy food or pay bills level, say so and we can discuss how you might handle that.

Then if the problem is not resolved properly, the IFA appears to have a liability to pay you redress to put you in the position you would have been in if the transfer had not been done on their advice.

The IFA is also going to end up liable for some reasonable stress and inconvenience payment even if things are restored to their original situation. Think in terms of a small number of hundreds of Pounds at most for these things, not becoming rich.

But for now, let the IFA and others get on with sorting out the mess.

Mrs_Mum99

The pension scheme paid the 25% lump sum. There is enough in the pot to pay the escalating annuity. The annuity provider's escalating annuity is higher than the scheme one would have been. So no problem there, but I was told I could have a much higher level one!
I am certainly not going to starve until this is sorted!
James, I will do as you suggest and wait to see what is offered. I'll report back when I know any more.

jamesd

I'm glad that the annuity provider's annuity is higher than the scheme one at least. That should leave you better off. That would also avoid the need for the IFA to pay redress, though it's possible that another escalating annuity might have offered more and that might then still leave something. Annuity firms aren't always the best for all types of annuity.

mania112

I'm just struggling with why the Pension Scheme are refusing to release the cash because 'my pension fund say the annuity has to rise by 3% pa and have a spouse's pension'.

If you transfer elsewhere, you should be able to do what you like, i'm sure there are no rules that MAKE you abide to the GMP rules.

If you wanted a higher value income, a level one without a spouse's benefit will be better than one escalating and with a spouse benefit.

In that respect I can't see why there's a problem (you have what you asked for).