Annuity complaint

Jeff88

My wife is coming up to her 60th birthday and her pension pot is maturing. Prudential gave the annuity figures in January stating total fund value, tax free lump sum and the annuity. My wife decided to proceed with the figures quoted but received revised figures in February - same fund value, same lump sum but almost £1900 per year less annuity. She queried this and after several frustrating phone conversations was told that the January figures were a mistake and the February figures were correct! All her planning for retirement was based on the higher annuity figure - can anyone tell us where we stand legally? We have the documentation giving the January figures - is it worthwhile going to the financial ombudsman?

kidmugsy

Jeff88 wrote: »

can anyone tell us where we stand legally? We have the documentation giving the January figures - is it worthwhile going to the financial ombudsman?

Sorry, no idea. But I can tell you that it's not very likely that the Pru offered her the best annuity deal she could get. I can also suggest that she consider not buying an annuity at all but instead using income drawdown - which might involve her transferring her fund from the Pru.


On the legal point, I suspect that to get anywhere she'd need to demonstrate that the wrong info led to her taking actions that have cost her money. I don't suppose that mere disappointment would cut much ice.

dunstonh

can anyone tell us where we stand legally?

Mistakes do not automatically give you rights to a higher amount. Indeed, I have had someone in a similar situation in the past the went to complaint, was rejected and went to the FOS and they rejected. That person quit their job and moved house based on the incorrect information and the difference was a greater amount.

Most annuity quotes are guaranteed for a period. So, its possible it wasnt really a mistake but a change in annuity rates.

Can you give us some context to what this £1900 relates to in terms of fund value (it should verify if its natural movement in annuity rates or a real mistake).

There is a cancellation rights period for her to change her mind.

Also, why did she not consider the open market option? Pru annuity rates are not that good unless there are guaranteed annuity rates or GMP involved.

atush

AS far as I can see, if she hasn't signed on the dotted line (irrevocably) then she is probably better off with the mistake. As it has stopped her making a mistake.

I'd say, although I have no proof, that more times than not taking the annuity offered by your provider is a bad idea. AS you would generally get better on the open market. then add in any health concerns she hasn't told the original company which should mean she should get more as she might not live as long as the average.

Then add in any haggling an IFA could do on her behalf. Then add in she doesn't have to buy an annuity at all if she doesn't want to (does not mean though that an annuity might not be the best thing for her).

there is a whole lot going on here and not simple really

bmm78

Complaints need to be addressed to the regulated firm before the Ombudsman will look at it.

Firms are generally not held to genuine mistakes that lead to incorrect figures.

Generally compensation falls into two categories:

Financial Loss - where the error has led to a financial loss, the regulated firm is (broadly) expected to restore the customer to where they would have been had the error not occurred

Non-Financial Loss - aka "Trouble and Upset". This is where no direct financial loss has been suffered, but distress and/or inconvenience has been suffered. The awards for this are generally modest (it's rare to be higher than £300).


Assuming she is within the cancellation period, the bigger issue is whether the annuity with the Pru is the best option. There isn't enough to go on as to whether this is a good deal or not (eg guaranteed rates or GMP), but like dunstonh points out Pru are not exactly renowned for their super-duper annuity rates.

The difference in annuity payments (£1,900pa) suggests that it is a fair-sized pot, so it is probably worth speaking to an IFA and getting regulated advice. While there will be charges involved, these are often less than the commission paid on sales without advice. At the very least, there needs to be an acceptance that going ahead without advice means that full responsibility for the decision rests with the buyer. Aside from anything else, advised sales provide an extra layer of regulatory protection that non-advised sales do not.

Jeff88

Many thanks.
The change in the figures was between 5th Jan and 16th Feb - over the phone they have admitted we should never have received the January figures!
The fund value is 80+K and there is a Guaranteed Annuity rate attached to some of the pot which was quoted at 7.8%- so of significance. When the January figures came through at just over £4900 p.a ( once the 25% tax free cash had been taken ) with a 3% annual rise, we were satisfied and did not 'shop around'.

The February figures now show the same pot value, the same amount to be taken as tax free cash but a drop to just over £ 3000 p.a with a 3% annual rise.

Prudential have spent 3 days investigating this to say they have made a mistake and the Feb figures are the correct ones. I have requested a detailed explanation of how the figures were calculated . I have lodged a complaint with the PRU.
Going forward , will there be any detrimental effect to the funds and benefits because of the delay ( not of my making) caused by the complaints process ?

atush

Maybe. thank me too and I will say lol.

Has the pot value fallen or risen since their 'mistake'?

Jeff88

Thanks for taking the time to reply.
In line with Pru policy, the fund was converted in to a cash fund one month prior to retirement date in March. The fund value has not changed between January 5th and the present date.