Aviva says they don't know how to implement the new pension rules???

dunroving

HappyHarry wrote: »

She could look at using the bond to fund that car purchase in the short term.

If the bond is an 'onshore bond', then basic rate tax is already paid. Additionally, in years when her income is below the basic rate tax level, this is not a tax-efficient plan, as the basic rate tax paid within the bond can not be reclaimed.

If the bond is an 'offshore bond', then basic rate tax will need to be paid on surrender.

Whatever kind of bond, it is not as tax-efficient as an ISA, or a pension tax-free lump sum, so accessing the bond is likely to be a better option for her.

dunroving wrote: »

That's interesting. I will have to check the details on the bond but I know the Aegon woman on the phone said any withdrawals would be liable for tax and that Aegon would not deduct tax at source. The Web page my friend access when she logs into her account is not very informative or user - friendly.

I've looked into this and the account is described as an "investment bond" with a bond policy number. Within the policy she is invested in units in two funds; one simply called "Ethical", consisting of UK equities and the Scottish Equitable Kames Ethical Corporate Bond fund.

The bond "current valuation" amount is listed as the same amount as the surrender value.

Nowhere within the rather limited information in her personal customer pages (i.e., login via the Aegon Web site) does it say whether this is an on-shore or off-shore bond. If withdrawals truly are tax-free that would suit her current situation perfectly but the Aegon customer service rep said withdrawals were liable for income tax. However, as per my comment re: Aviva, I truly do wonder about the accuracy of the information they are giving.

agarnett

dunstonh wrote: »

They do not and it would be wrong for them to do so. Their remit is to provide information about their product.

Well despite what you say, Aviva do appear to harbour pretensions of being guardians of the public good, being keen to display their status as accredited industry educators to the merry bands of IFAs who flock happily to their website for a daily dose of Chartered Insurance Institute approved (apparently) Continuous Professional Development, e.g. http://www.aviva-for-advisers.co.uk/adviser/site/public/tech-centre/tech-article-detail/planning-options-at-retirement .

Nothing there about state pension options ... but maybe we can't expect the industry's chartered educational body to consider such things either ?

jamesd

dunroving wrote: »

But surely they at least have an ethical responsibility to give an idea how things will work from April 6th rather than say they have no idea? They were definitely pushing the annuity, not just providing information. They didn't even advise her that the situation would be different soon. To me, if she had taken out an annuity that would have been mis-selling as that is definitely not her best option.

I suggest that you consider encouraging her to make a complaint that the sales process failed to identify that she was of an age where deferring the state pension was possible and would have provided her with 10.4% of the amount spent as income, above the amount offered by Aviva, and that this appears to be a failure of the outcome-measured regulation that calls into question the fitness of Aviva management to hold senior positions within a financial services business if they allow these failures to continue.

dunstonh wrote: »

Can you explain how they were doing this as I cannot see anything in the documentation that "pushes" annuity.

All they need to do is not tell the customer that they are old enough to get three times the guaranteed income for their money by deferring the state pension. Or say it' a lot of hassle and why not take the more convenient offer that Aviva have just made? The sort of failures that the FCA found in its study of annuity sales.

dunstonh wrote: »

It isnt for them to say what the best option is. They are the product provider and they state the options their product has. Reading the pack I have in front of me it says:

"there may be other options for your retirement including income drawdown. These options may also let the member have a tax free cash sum before they geta regular income. We've included some information about these in the "your retirement booklet".

That appears to be inadequate. They were faced with a customer who they knew was of state pension age and who could get three times the income of any inflation-linked product they were likely to sell her. Proceeding with the sale in such a situation would be an irresponsible failure to meet the standards expected in this particular industry. As part of their fitness to hold senior positions, the senior managers at Aviva are supposed to be ensuring that their sales process produces good outcomes for their customers. One third of the guaranteed inflation-linked outcome but a sales profit for Avava would not be a good outcome.

dunstonh wrote: »

The pack also has two pages on the 2014 budget changes which states the key changes and gives two website addresses for those looking for more info online.
You can see the webpage here: http://www.aviva.co.uk/savings-and-retirement/approaching-retirement/how-do-i-take-money-from-my-pension-fund/

The booklet has sections on "if you retire from April 2015 onwards", "I want to delay retirement", "I want to take some of my pension benefits now and leave the rest" and "other retirement options" and a final section on what happens next.

And for the benefit of James, there is a section on the ability to defer the state pension. It says it is possible to defer taking it. It quite rightly does not give advice on that though. Just presents it as an option.

So, I click on "Use it to buy an income for your lifetime" and that takes me to this page which makes no mention of deferring the state pension but rather presents an annuity as the first choice and drawdown as the alternative. So Aviva has through its site navigation path directed customers who want a lifetime income into buying their product rather than the guaranteed option that pays more.

That's a failure of outcome-directed regulation and of Aviva's management to ensure that customers are offered the options that are likely to be best for them. Or in this case, even to mention that that option exists at all when the customer follows their navigation path.

So, I click to find out more about the annuity and get taken to this page, which emphasises in big text at the top that "It goes to show you can't predict the future That's why a guaranteed retirement income could be a great idea". Though they don't say what goes to show it. Now I clock on the see "how much guaranteed income you could get" choice, which is an annuity calculator, it seems. The landing page does not mention that there is an option to defer the state pension, nor that that option normally pays more than an annuity for those who are close to state pension age. the fancy calculator makes all sort of highly individual calculations tow ork out what to pay but I assume that at no point does it do the basic calculations to present a comparison of income from deferring with the income from the annuity, which is what I expect and want to see to clearly show to the customer the alternative income available.

At the moment that web site design has promoted me to consider making a complaint that Aviva is railroading their potential customers who want a guaranteed income for life into buying an annuity.

So, what's the navigation path from that initial landing page that will tell a customer who wants a guaranteed income for life about the option to defer the state pension and how that income typically compares to the income from an annuity? I've taken what appears to be the most obvious path and didn't see any sign of it.

dunstonh wrote: »

For reference I have got three Aviva pensions on the go to commence benefits and the same packs came with all three. One is a group PPP, one is an individual PPP and the other is a section 32 buy out bond with GMP. The booklet is AN16003 and published 07/2014.

Would the people having those annuities be able to get a higher income if they had instead deferred claiming the state pension? How old are they? Any reason why deferring is suitable for their specific circumstances?

jamesd

Loughton_Monkey wrote: »

Can't see this holding up 'in court' (as it were).

It can only be pertinent to make customers aware of options directly concerning the pension at issue which is clearly the specific product with that provider.

No pension company can (or should) make any comments on the State Pension, or indeed a pension from any different provider.

It's OK on these boards to throw into the argument suggestions about, say, deferring state pensions, since we are clearly not regulated or offering 'advice' in the official sense. But for (say) Scottish Widows to start mentioning State Pension options in the context of one of their policyholders' own funds, without knowing anything whatsoever about their other pension entitlements or financial position could get them into very deep water.

I don't suppose you read the FCA's study of annuity sales processes which says what the FCA expects and that it measures things by outcomes and whether senior managers act to produce good outcomes for their prospective customers? If you haven't read it please let me know and I'll point you to it. Your arguments are effectively countered by the expectation that firms are to inform customer and are supposed to ensure that their customers receive good outcomes, including declining to make a sale at times.

Financial services is not supposed to be an area where vendors are expected to act like used car salespeople and conceal and divert away from the better choices to maximise their sales and profit.

I agree that there is potential trouble if Aviva was to directly go into advice but Aviva should have a process in place that identifies customers who could defer within a reasonable time period - from a few years before state pension age to several years after - and offers an alternative path for them that includes the potential for Aviva to refuse to sell where the facts indicate that the sale does not appear to be in the best interest of their potential customer, unless the customer obtains financial advice that compares the annuity to deferring and finds that the annuity is the best choice for the customer.

That's the sort of sales process that I expect from outcome-based regulation which measures firms and their senior managers by whether their customers end up with the best choice. It's also the sort of thing that was singled out or praise in the FCA's study.

jamesd

dunroving wrote: »

As per the information I gave in the OP, this was an initial call to Aviva's generic current customer number because she was looking into her options for getting hold of a relatively small sum in order to replace her damaged car, so it was an unexpected situation. The plan was to buy a new car in the following month or two (she has a loaner in the meantime).

I know there is a certain responsibility for people to inform themselves about finances, but in this case, I think the person on the phone really not only gave bad advice, but IMO misleading advice.

I agree. I think that a complaint is merited because Aviva clearly failed to properly serve their customer and misrepresented - either deliberately or not - the options available to her, including taking a tax free lump sum then simply waiting until after the changes, using the six(?) month window available between taking a lump sum and deciding what to do with the rest.

Aviva's own products would presumably have allowed her to transfer a portion of her pot into a different pot with Aviva then potentially use the current small pots rule to withdraw it all as a 25% untaxed, 75% taxable pot.

Aviva also offers an income drawdown product that would have allowed a tax free lump sum to be taken without buying an annuity at all.

Initially it appears that the process at Aviva failed to even identify the best product sold by Aviva that would meet her needs, even using the rules in place until 5 April 2015.

And all of that appears to be a significant failure that is perhaps indicative of a sales force that is heavily oriented towards making annuity sales and perhaps even incentivised financially or in indirect employee ratings used by managers to do so.

dunstonh

Would the people having those annuities be able to get a higher income if they had instead deferred claiming the state pension? How old are they? Any reason why deferring is suitable for their specific circumstances?

No they wouldnt.

At the moment that web site design has promoted me to consider making a complaint that Aviva is railroading their potential customers who want a guaranteed income for life into buying an annuity.

That would be the correct direction to take as only the annuity provides the guaranteed income for life.

jem16

dunroving wrote: »

If withdrawals truly are tax-free that would suit her current situation perfectly but the Aegon customer service rep said withdrawals were liable for income tax.

Withdrawals from an Investment Bond are only tax-free (or to be more precise tax-deferred) if it's 5% of the original amount invested each year. Anything else above that creates a chargeable gain.

The 5% pa withdrawals can be rolled up if not used each year.

When the Bond is finally encashed any withdrawals are added back on to calculate the overall gain to see if tax is due.

jamesd

dunstonh wrote: »

That would be the correct direction to take as only the annuity provides the guaranteed income for life.

Don't you consider that the state pension provides a guaranteed income for life? Why not?

dunstonh

jamesd wrote: »

Don't you consider that the state pension provides a guaranteed income for life? Why not?

Because the pension fund and the state pension have no direct links.

I do get what you are saying but I just think there are too many jumps between what you want them to say and what they can say. They have to avoid crossing the advice line as it is a scenario that is not right for everyone.

jamesd

I agree that it's not right for everyone but I don't see any good reason not to mention it as an income option that is likely to pay more for those of relevant ages.

I agree that with the FCAs current rules they can't do what I'd like them to do: provide a personal illustration of both their annuity and deferring the state pension, using cash-equivalent investments for the annuity plus state pension income while deferring.