Mistake in Pension Fund

64148

I have recently been informed by my Pension Fund provider a mistake over a number of years lead to an underpayment to my pension fund on maturity almost 10 years ago.
The original sum (less a tax free 25% sum) from the Pension Fund was used to purchase an Annuity for my lifetime, this complied with the law at that time.
If the mistaken amount had been available to me at the time the annuity was purchased there would of course have been a higher annual annuity payment provided for my lifetime.

What can be considered a reasonable claim from the pension fund provider to compensate me for the lost revenue ?

Thanks,Emgee

Your_Hero

If you put some numbers on it I'm sure you would receive more helpful replies. Otherwise my answer would simply be whatever income you lost out on over the years plus interest and a higher income for life. This would be taxable. Also any tax free lump sum entitlement.

Best to let the providers work this one out and ask them to provide a breakdown.

64148

Thanks for the reply, I didn't put numbers up as just seeking views on what could be considered a reasonable claim.
Income lost to present is easily calculated as the additional amount of annuity the mistaken sum would have purchased is known.
Interest received on various accounts since the annuity was purchased are also known.
That takes care of the loss to date.
As we are constantly being reminded we are all living longer can life expectancy be assumed to be 85 in the case of a male ? or does some other formula need to be used to calculate any future loss ?
Thanks, Emgee

Your_Hero

64148 wrote: »

Thanks for the reply, I didn't put numbers up as just seeking views on what could be considered a reasonable claim.
Income lost to present is easily calculated as the additional amount of annuity the mistaken sum would have purchased is known.
Interest received on various accounts since the annuity was purchased are also known.
That takes care of the loss to date.
As we are constantly being reminded we are all living longer can life expectancy be assumed to be 85 in the case of a male ? or does some other formula need to be used to calculate any future loss ?
Thanks, Emgee

The provider may just offer you an annuity with them to secure your "future loss".

64148

The provider has worked it out with a pittance of interest and no allowance for future loss of income.
Rgds, Emgee

PeacefulWaters

Higher lump sum from 10 years ago. Plus interest. I'd suggest using the FOS default interest rate for compensation of 8%.

The difference between the annuity that should have been paid ten years ago and what has been paid. This should be a percentage of each payment made from the annuity to allow for any indexing. Plus interest on those missing payments. Again at 8%.

The correct annuity payment, based on annuity rates 10 years ago, from now until death. In other words, what you would have got if they hadn't messed up.

And a token £250 by way of apology. You've had a lower standard of living as a result of their error. Perhaps more.

If they won't play ball use the FOS.

dunstonh

Remember that the 8% is not compound. If the provider has used a lower compound rate, it may be higher than the 8%.

I would have thought the provider would give the annuity rate they gave to the rest of the money. That would be the sensible and expected outcome.

64148

The pension fund provider is not the annuity provider, the annuity was bought on the "open" market from another provider at better terms.
If the 8% is a one-off of the loss to date it would amount to considerably less than would have been earned by saving the additional annuity amount when paid over the 10 year period at a reduced rate.
Rgds, Emgee

dunstonh

The pension fund provider is not the annuity provider, the annuity was bought on the "open" market from another provider at better terms.

I would expect them to either honour the terms using an internal annuity, if they offer one, or make up the difference in the fund value to get the equivalent of the annuity rate offered back then. That may not actually be that expensive as buying an annuity 10 years later may be enough to make the difference. In which case, a lump sum for the lost income plus interest would be available.

64148

At last ABBEY LIFE ASSURANCE COMPANY LIMITED has paid the settlement as determined by the Financial Ombudsman.
I received the following payments.
25% of the mistaken amount tax free.
Plus Simple interest at 8% to be taxable.
Unpaid additional annuity payments from Sept 2008, tax free.
Simple interest on all payments at 8% to be taxable.
Tax free sum for annuity going forward (this was 90% of the original total offered)
Their first offer did not include any payment for the annuity going forward and the interest was calculated at a miserable amount.
Also received £250 for distress and inconvenience for the way Abbey Life handled the complaint.

I am happy with the outcome of the FOS investigation, being £1,500 better off as a result of waiting almost 18 months.

atush

thanks for letting us know the outcome