Allied Dunbar Pension - "evaporated"

MikeFloutier

Following the recent Pension legislation changes, I thought I'd cash in my wife's small (£500) Allied Dunbar (Zurich Life) pension.

The only correspondence I could find was a letter in 2002 showing 34.59 Capital Managed 3/4 units valued at £532.82.

I guessed that the value of this would have fallen since then but probably have recovered a bit.

I was slightly surprised to get their response -

"Unfortunately your pension has no value now.... I guess the on going charges have eroded its value over the years."


Is this normal do you think, or should I pursue them?

SnowMan

Unfortunately this sort of arrangement was very common in years gone by. It is this sort of thing that has lead to large swaithes of the population mis-trusting pensions. Things are a bit better now at least (some would say a lot better) but that is no help to those caught out.

Typically the first couple of years of pension contributions will have gone into capital units, which because of ridiculously high charges applied to them meant they were worthless or virtually worthless. The first few years contributions effectively paid the high sales commission of the salesperson who sold the pension and other costs. Of course they were designed to give the illusion there was something in the pot, but in reality there wasn't because of these high charges, and if you tried to transfer the capital units the transfer value would be either nothing or peanuts. The name 'capital units' would have given you the false impression something worthwhile was there, in reality they should have been called 'suicide units'.

You will hear some nonsense from some in the financial services industry about it being your wife's fault there is nothing in the pot because she didn't continue contributing. That is silly because there may have been good reasons why someone might not have continued contributing. For example they switched jobs within 2 years and joined the company pension scheme, or an unexpected change of circumstances occurred and someone couldn't afford to continue contributing.

I would raise a complaint with whoever sold your wife the pension. However I wouldn't hold out much hope of getting anywhere.

Allied Dunbar were known in the industry as Allied Crowbar, which would be quite funny, except that people have been caught out by their crowbar activities

MikeFloutier

Thanks SnowMan, that makes sense, she left the company having got ME and wasn't able to work again for many years.

dunstonh

Is this normal do you think, or should I pursue them?

Allied Dunbar have not traded for many years. Their plans were priced up in the era of high up front charges. Those days required you to pay in to the plans for a number of years before you started to obtain units of a type that accrued value. In the early years, you only obtained units that went towards paying the charges.

So, if the plan was stopped early on, the value would erode back to zero. So, normal for the era.

she left the company having got ME and wasn't able to work again for many years.

Also normal for that era was an add on called waiver of premium benefit. This was low cost bolt on to pensions that meant if the person was unable to work for more than 6 months as a result if illness, the insurance company would continue to pay the pension premiums until able to return to work or age 60 (whichever came first). Did she have that benefit on the plan and perhaps failed to claim on it? (it may be possible to put in a retrospective claim even after all this time).

kidmugsy

dunstonh wrote: »

Also normal for that era was an add on called waiver of premium benefit. This was low cost bolt on to pensions that meant if the person was unable to work for more than 6 months as a result if illness, the insurance company would continue to pay the pension premiums until able to return to work or age 60 (whichever came first). Did she have that benefit on the plan and perhaps failed to claim on it? (it may be possible to put in a retrospective claim even after all this time).

Hats off, d. Excellent.

MikeFloutier

Thanks DunstonH, will try to find out re premium waiver.