WARNING TO PRA & FCA: AVIVA not fit for authorisation to conduct pensions business

agarnett

This is a second warning of the type. This time it is not about Friends Life, which was a separate company, but coincidentally has since my first warning become part of the Aviva Group. It is about Aviva's own branded retirement products division.

Those that have suffered my cautionary tales on With-Profits shenanigans by both Friends Life and Aviva will know that very recently Aviva announced yet another new style of bonus to those of us who did not play their game in the bribery exercise they conducted between 2007 and 2009.

87% of their with-profits policy holders did play Aviva's game, and accepted a bribe in 2009.

I am one of the 13% who didn't.

Consequently I have received a letter that describes a new bonus they have magicked out of the hat. But hold on, it is only an illusion at this point because it has not been put into any policy funds with my name on it.

The wording of the letter is as follows:

[SIZE=-2]
Aviva
PO Box 520
Norwich
NR1 3WG
Tel. 0800 953 1777
https://www.aviva.co.uk

Dear Mr Garnett

Policyholder: A Garnett
Policy Number: XXXXXXX
Policy type: Pension Buy Out Plan

Important update on your investment in the Aviva Old With-Profits Sub Fund

As a customer invested in one of our with-profits funds, we have some very good news for you.

The fund in which you're invested is required to hold a certain level of money, over and above the amounts needed to make payouts to policyholders. This acts as a 'buffer' and provides security for our policyholders.

Following improvements in the financial position of the fund over the last five years, we're pleased to say the fund now has additional surplus, over and above the 'buffer' required, which we are able to share with policyholders like you.

What this means for you
We plan to add an extra final bonus to your policy when you decide to take money out of this with-profits fund. We currently expect the extra bonus to increase your policy benefits by up to 9%, but please be aware this could change over time.

We'll work out the amount of extra final bonus, when you eventually take money out of the fund.

We have set the extra final bonus at a level we expect to maintain and even hope to increase over time, but this can't be guaranteed. In some circumstances we may need to reduce or even stop it. We would only stop it if all of the 'buffer' was required to provide
security for policyholders. This may happen if economic or investment conditions change significantly.

You can track the extra percentage applying at any time by visiting
aviva.co.uk/oldwithprofits.

You don't need to do anything
You don't need to take any action. We'll continue to manage your investment in exactly the same way as we do now. You can also be reassured that the fund will continue to hold a 'buffer' over and above the amounts needed to make payouts and provide ongoing
security for policyholders.

lt's important you know
• Any money you invest into the fund on or after 1 January 2015 won't get the increase shown above.
• If you have other policies that are affected, we'll write to you about these separately. You can only receive the extra final bonus once.
• The impact of the extra final bonus can vary when additional policy guarantees apply. You can find out more about this by visiting aviva.co.uk/oldwithprofits.

You can keep track of your investment by checking the statements we send you each year or by getting in touch with us.

If you want to make changes to your policy, it's always a good idea to speak to a financial adviser. They can help you understand any guarantees or benefits which could be affected by the changes you want to make.

Need any more information?
You can find out more about our with-profits funds by visiting aviva.co.uk/withprofitsnews.

If you want to talk to us about your policy or this letter please get in touch by calling 0800 952 0353.[/SIZE]

Those who have read some of my ouput on MSE in this forum lately will realise that I am trying to make decisions about all my pension pots. It is difficult enough to understand how they all were designed to work originally, without being kept in the dark about how they have been changed unilaterally by pension providers and by government. Information is key.

Now anyone reading the above who is not an Aviva policyholder might comment that it all sounds fine and dandy.

But, if I told you that since early 2008 Aviva have not sent any annual statements, but instead sent a useless document called an Annual Certificate, you begin to realise that in order to bound the 9%, a policyholder needs to know what number it applies to.

Now it just so happens that before this bonus was announced, I asked for a transfer value. I was pleasantly surprised because it was nearly 40% higher than any figure appearing in any Annual Certificate I have been sent since 2008.

I was less impressed when I began to realise that Aviva had been hiding the performance of my pension investment from me until I asked for a transfer value. Up until 2007, the transfer value was usefully volunteered as an integral part of what was called "Your Yearly Statement".

Anyway, until recently, I had heard about some Aviva WP policyholders qualifying for a special 9% bonus, but it was unclear who was being written to about it. I have read elsewhere that some policyholders who do not qualify have been written to with this letter, and some that do, may not have received the letter.

So I called Aviva and was told yes yours is one that qualifies. When I asked how much I was told 9% currently but it could change. When I checked how much that was in my case since my transfer value before the bonus was about £50,000, it was agreed that 9% would add about £4,500 to my transfer value.

I asked if that could be put in writing. They said they could send the letter again. I said well that's fine but you also need to send me the number in my case please.

I like to have these things in writing, especially if it is something I wasn't expecting which changes a policy.

I haven't had it yet, and in between times having visited the Aviva website FAQ on the same announcement, I had my doubts of what the 9% actually applied to. There is no Market Value Reduction or other penalty for transferring out on my policy, so it is reasonable to assume that when I read an explanation like "We currently expect the extra bonus to increase your policy benefits by up to 9% ...." that the transfer value would be increased by 9% right now.

And so it might - that is what I was told when I called them.

But the FAQ uses different language - it cites examples where the 9% is calculated not on the policy benefits, but on the "with-profits investment".

Most policyholders would expect the two phrases to mean the same thing. But I am more cynical and with very good reason. I know that with-profits investment fund management has been corrupted over many years into a type of investment that many of the with-profits products never were described as when they were sold. Most policyholders just get to suck up what they are given.

So I called again to check. I was told that a special department did the calculations manually and I could be sent a new transfer value which would show me - it might take 10 days. They are busy apparently

I said fine, but meantime since we are talking just basic maths, can we not just agree the ballpark figure ? The person I spoke to was reluctant but agreed that it could be worked out with the supervisor. The start point was the pretty useless figure that appears in Annual Certificates and which has to be inflated by almost 40% to arrive at a transfer value. I bit my lip. Did I mind holding ? They'd work it out. I held.

Back they came ... the figure was spelled out digit by digit. I got the impression the first language of the call centre person was not English, so the figure was not presented as "X thousand so many hundred and ..."

Instead, the number given was 34678.4 "three four six seven eight point four"

Oh I said, is that right? So that's the 9%?

Yes based on the fund value as at yesterday's date.

OK let me repeat that back to you ... and I did, four times, laconically simply emphasising each digit and especially the point in it.

The call centre person did not twig.

Unbelievably, I then had to point out the gravity of error. The number given was something over 10x 9% x Yesterday's fund value, and if what I was told is to be believed, the two of them worked it out together!

The call centre agent apologised and went back to the supervisor and this time it came back with it exactly correct to 100th of a penny - it was the same figure I'd had in front of me for 5 minutes tapped out on my PC calculator! I'd even called out the number as a suggestion before they went off to start calculating it themselves!

But I still do not know the actual effect of this change. Had they got the right number (eventually) in the second call, or was the £4,500 estimate given in the first call more accurate?

I must wait up to 10 days for the new transfer value.


It is upon this premise that I make my warning to PRA & FCA. I judge that the type of communication I have reported here coupled with the crooked nature of the change itself, and the failure to report to policyholders properly on the performance of their pensions investments (like mine anyway) on an annual basis since 2008, is all evidence that Aviva are not currently fit to be authorised to conduct pensions business.

Does anyone disagree with the validity of my conclusion?

sandsy

If you seriously want to make the FCA or PRA sit up and take note then I suggest it would be more appropriate to write to them directly. Though I don't quite see what relevance this has to the PRA as nothing you've written suggests that the company is in breach of its solvency requirements.

As far as the FCA is concerned, I suggest some time spent on COBS 4 and COBS 20 before you write with appropriate references to any potential rule breaches you think you've identified might be more likely to result in a response rather than a rant.

agarnett

sandsy wrote: »

If you seriously want to make the FCA or PRA sit up and take note then I suggest it would be more appropriate to write to them directly. Though I don't quite see what relevance this has to the PRA as nothing you've written suggests that the company is in breach of its solvency requirements.

As far as the FCA is concerned, I suggest some time spent on COBS 4 and COBS 20 before you write with appropriate references to any potential rule breaches you think you've identified might be more likely to result in a response rather than a rant.

Thank you for your opinion, Sandsy.

I am sure that PRA can already work out for themselves that Aviva's solvency must be in question for a number of reasons, and the way they run their pensions business may simply reflect their struggles with solvency.

I haven't looked at COBS4 lately, but I did spend time on COBS20 a week or two ago, and simply confirmed what I already was concluding.

Do you conclude differently?

agarnett

I have returned to this thread because Aviva aren't doing too well in my case.

I seem to know more about my pension policy and their with-profits fund antics than they do - at least at the levels they want to talk to me at.

I still do not have any accurate information on my policy or the benefits it is supposed to give me at retirement.

I have had to suffer their staff referring to it as an "old policy" as if that is some valid excuse for ignorance so many times I have lost count. I am becoming an old man and am approaching retirement so naturally I have the best laid plans which are coming to fruition after an age - most of them not exactly as I expected! But for a provider to call existing business old as if somehow I have deferred my retirement to age 120 or something and am asking difficult questions about something their grandfather might have sold me when of course many of the team that devised the policy are probably still on the payroll - how can that be acceptable? The damned policy is has only been running for 20% of my life so far!

How can this type of ineptitude possibly be authorised by regulators ?