Prudential keeping pension pot after death of my father

79lulu

Hi there

im looking for some advice please of where I can take this problem. 

My Dad was advised by financial advisor  to take out an enhanced annuity with 10 year guarantee back in 2012, however my Dad always said on his demise the pension pot would go to his beneficiaries. Unfortunately he died last year very suddenly from cancer and we didn’t see it coming so didn’t look into his finances to see what options were available. Also in his risk assessment it clearly says this was my dads wishes that his pension pot should go to his beneficiaries. Prudential will only pay out for the term of his annuity and they get to keep his pension pot. His advise from the FA doesn’t make sense as there was another plan which was paying out more and no mention of options with death protection. I also see the FA has happily taken the commission for the last 9 years but can’t see any evidence of 3 yearly reviews to meet his requirements outlined in his initial risk assessment. 

My poor old dad would be rolling in his grave knowing the insurance company are keeping his hard earned cash!
any advise greatly appreciated. 

Many thanks

Andy_L

Did you Dad say "the pension pot would go to his beneficiaries" before or after he took out the annuity? If it was before then that is true. If it was after then he was mistaken, when you take out an annuity your pension point is used to buy the annuity ie at that point you no longer have a pension pot. 

What he may have meant is that, if he died within the 10 year guarantee period, the pension would be paid out until 10 years are up (I don't know if that's paid annually/monthly to the dependants or if they hand over a lump sum) 

If he wanted the pot to go to his dependants he should not have bought an annuity but gone for something called "Drawdown" instead - does the documentation say why that option wasn't chosen? It may be that when the costs/benefits of that were explained he chose the annuity with guarantee instead

Linton

Annuities are a form of insurance.  When you buy one you pay the money to the pension company, it is no longer "your" pot. Those people who die early after having started to take their pension pay for those who live longer than average.  Just like car insurance - those people who don't have an accident don't get their money back.

However if it had a 10 year guarantee when bought in 2012 the pension would be paid for 10 years no matter if your father had died last year or 9 years ago.  How the payment is made I dont know but would guess that it goes to your father's estate.  Your father could have bought an annuity which did have death benefits, but of course the income would have been less.  Maybe that's is why he apparently chose not to do it.  My guess is that the initial risk assessment was made prior to his decision to buy an annuity.

The FA getting commission is different to having to paying an FA for ongoing investment management.  If all the money was spent on buying an annuity there would not be any investments to manage or to review.

woolly_wombat

Sorry for your loss.

When someone purchases an annuity they give up a pension pot in exchange for the certainty of an income. 

The 10 year guarantee meant that the annuity would continue to be paid for 10 years even if the person taking out the annuity died before the end of the guarantee term.

The plan that would have paid more probably did not include that guarantee; your dad would have given up some income so that the annuity would continue to be paid to the beneficiaries in the event that he didn’t make it to the end of the term.

That’s my understanding. No doubt others will be along shortly to add their thoughts.

Albermarle

Basically with a lifetime  annuity , you get a guaranteed income until you die , in exchange for handing over your pot.
Those who live longest make a 'profit' and those who die earlier 'lose out' .

Silvertabby

My sympathies.

Previous replies are correct, in that your dad spent his 'pot' in return for the promise of an income for the rest of his life.

Sadly, a common misunderstanding with pension guarantee periods is that some people assume that the 10 year guarantee  (as in this case) starts from the date of death, and not the date of the first payment.  It may be that your dad believed that you would get 10 years of pension payments, regardless of his date of death, hence the confusion.

dunstonh

Prudential keeping pension pot after death of my father

Sorry for your loss.

Firstly, there is no pot.   Your father bought an annuity. That annuity is bought with the pot.     The pot ceased to exist in 2012.

 Also in his risk assessment it clearly says this was my dads wishes that his pension pot should go to his beneficiaries.

That would explain the 10 year guarantee period.    That was the longest period you could have in legislation in 2012.  it wasn't until 2015 when legislation changed and allowed longer periods and alternative death options.

His advise from the FA doesn’t make sense as there was another plan which was paying out more and no mention of options with death protection.

It is usual for advisers to get a range of options quoted to allow the individual to see the cost differences of each option.   e.g.  with no guarantee period, provider A had the best option and it would pay £xyz a year.   However, with a 10 year guarantee, provider B had the best option and would be £abc a year.    So, the cost of the 10 year guarantee is the difference.

 I also see the FA has happily taken the commission for the last 9 years but can’t see any evidence of 3 yearly reviews to meet his requirements outlined in his initial risk assessment. 

Annuities do not pay ongoing commission.    So, where are you seeing this ongoing commission?

My poor old dad would be rolling in his grave knowing the insurance company are keeping his hard earned cash!

Probably not as at no point would any documentation state that the annuity pays a value on death other than the income to the end of the period.   And if multiple options were supplied, then this would indicate a discussion took place on the cost of the different death benefits.     The default death benefit back in 2012 was 5 years.  So, an extension to 10 years does indicate that the discussion took place.

Marcon

79lulu said:

I also see the FA has happily taken the commission for the last 9 years but can’t see any evidence of 3 yearly reviews to meet his requirements outlined in his initial risk assessment. 

If your dad bought an annuity there would be nothing to review (at least in terms of the annuity) at 3 yearly intervals. 

Did he have other savings and is it these which are generating commission payments (as pointed out above, annuities don't pay ongoing commission once they have been purchased)/subject to 3 yearly reviews?

TVAS

You need a subject access request to get the following:

Factfind
Meeting Notes
Quotes
Recommendation Letter

However an enhanced annuity is a pension contract that pays a higher sum because the annuitant, your late father either had poor health, diabetes, heart condition such as angina, heavy smoker (over 20 cigs a day). So the insurance company deem the life expectancy to be shorter than someone who does not have those conditions.

Having an annuity for a short term i.e. 10 years to me is not appropriate for someone who is deemed not to have a long life span. So the advice seems dodgy in this respect.

HOWEVER

I have seen so many cases like this where the most important thing is maximising the income. Men have taken single life annuities so when they drop down dead the wife who thought she would continue to receive some or all of the income gets NOTHING. This is my bug bear when female spouse do not get involved in family finances.


In the recommendations letter you are looking for the options laid out the advantages and disadvantages. Why was drawdown discounted.


Ask the provider to give you a list of the fees initial and if any ongoing to the IFA.

If you think you have a case complain the the IFA referring it to FOS if you have no joy with him.

edinburgher

@TVAS - data protection legislation only applies to "natural persons" - I.e. the living. They might opt to make a voluntary disclosure, but there's no obligation to do so. 

dunstonh

You need a subject access request to get the following:

GDPR no longer applies as the father is dead.  So, a DSAR cannot be requested.

Having an annuity for a short term i.e. 10 years to me is not appropriate for someone who is deemed not to have a long life span. So the advice seems dodgy in this respect.

Having an enhanced annuity means it was priced with the life expectancy in mind.   So, the advice seems correct in this respect.

I have seen so many cases like this where the most important thing is maximising the income. Men have taken single life annuities so when they drop down dead the wife who thought she would continue to receive some or all of the income gets NOTHING. This is my bug bear when female spouse do not get involved in family finances.

That I do agree with.

However, having just done a  case like this in the last few weeks where we recommended 100% spouse as the objective was income for both lives, after supplying the figures, the husband has decided to go single life with a 10 year guarantee because the reduction to include spouse was too great.   So, now we are doing the case on insistent client basis (going against advice).

Ask the provider to give you a list of the fees initial and if any ongoing to the IFA.

It is a 2012 case.   That makes it commission. Not fee based and as mentioned, non-investment linked annuities do not pay any ongoing fees or ongoing commission.