Are Phoenix trying to pull a fast one ?

Gazoza

My wife has a small Section 226 Self Employed Retirement Plan (fund value approx. £20k) with Phoenix (ex NPI). This policy has a Guaranteed Minimum Pension. She has attempted to take the GMP (annuity) but Phoenix have absolutely insisted (claiming that it is legal requirement) that she gets an alternative annuity quote (supposedly at Phoenix's expense) from an outside source (that they have directed her to).

Is there really any such legal requirement?

I had a very similar policy in place with Phoenix (again S226 ex NPI with GMP, but value of £160k) that I took last November. Whilst they suggested an outside quote I just told them “NO” and they simply accepted that.

It's worth mentioning that the GMP well exceeds anything that I can see is available in the marketplace - even allowing for some (potential) low level impaired life aspects.

So are Phoenix trying to pull a fast one or what?

Linton

Look at https://www.moneyadviceservice.org.uk/en/tools/annuities under "It pays to shop around":

60% of people stay with their existing provider when buying an annuity.
8 out of 10 lose out by not switching. †

Your pension provider may have provided a link to us. That's because the regulator for financial services – The Financial Conduct Authority – now requires all pension providers to help customers easily identify if they could be getting a better deal by shopping around. Here you can compare products that provide a guaranteed income – either for life or for a fixed term.

It would seem that Phoenix are simply trying to follow the guidance of the FCA.  This is also protecting themselves in that they are avoiding the risk of you coming back later claiming compensation for mis-selling if it turned out that you hadnt realised the the GMP was not the best choice - eg your health may have warranted an enhanced annuity greater than the GMP.   Phoenix themselves do not have the authority to provide any sort of advice.

TVAS

No. Insurance companies do not pull fast ones.
She cannot have a Section 226 with GMP do you mean a Section 32 Buy Out Bond?
A Section 32 is an individually owned plan which received a transfer of benefits from a previous occupational scheme.
Benefits 
The Provider needs to guarantee to pay the GMP and this requirement is priority over any other.
The tax free cash is based on salary and service which an be higher than 25% of the fund because it is based on Inland Revenue maxima a more generous calculation than scheme rules. If the GMP is not covered/provided for the maximum tax free cash can be reduced. It is possible to take all of the fund excluding GMP as tax free cash.

The insurance company is obliged to ask policyholders to do some homework before taking benefits from them. This means your wife might be able to get a higher annuity from another provider so yes there is a legal requirement and this came about because people could not be bothered to do a little bit of research and lost out financially on better rates which looks like the case in this instance. There is no excuse as you we have Google for a comparison of annuity rates. Just after I joined Sun Alliance in 1990, one of my colleagues said they had to calculate annuity rates by hand. To give you an example a joint life annuity, 50% spouse increasing at 3% p.a. £100,000 purchase price.
Scottish Widows £2,852 p.a.
Legal and General £2,638 p.a.
https://www.which.co.uk/money/pensions-and-retirement/options-for-cashing-in-your-pensions/annuities/annuity-rates-aly8c2z86kds

The annuity market is every competitive and has always been have a look at the link below. 
Just as an aside will the provider be calculating tax free cash on salary and service? If they say no because they did not receive salary information at the time of transfer your wife can contact the HR department of the transferred scheme and request copies of P60 from that employment which is what Phoenix will need. 

xylophone

Was this a S226 with a Guaranteed Annuity Rate?

https://www.pensionsadvisoryservice.org.uk/about-pensions/pensions-basics/contract-based-schemes/retirement-annuity-contracts

dunstonh

My wife has a small Section 226 Self Employed Retirement Plan (fund value approx. £20k) with Phoenix (ex NPI). This policy has a Guaranteed Minimum Pension. 

As mentioned, it cannot have GMP as its a S226.  However, I have something ticking away at the back of my head that makes me think that NPI used to refer to their GAR as guaranteed minimum pension.    So, a terminology blip.  i.e. its not GMP but a GAR with a bad  internal name.

She has attempted to take the GMP (annuity) but Phoenix have absolutely insisted (claiming that it is legal requirement) that she gets an alternative annuity quote (supposedly at Phoenix's expense) from an outside source (that they have directed her to).
Is there really any such legal requirement?

Yes, when using the in-house provider, they have to check the rate and compare with generic rates on the open market and tell your wife whether the in-house terms are the best available or not.   Although I belive it is optional.   If an adviser is involved, then it certainly can be refused.  I don't know whether it can if it is non-advised.

I had a very similar policy in place with Phoenix (again S226 ex NPI with GMP, but value of £160k) that I took last November. Whilst they suggested an outside quote I just told them “NO” and they simply accepted that.

That would suggest it can be refused unless Phoenix have decided to change their mind on how they do these things.

So are Phoenix trying to pull a fast one or what?

Phoenix stands to gain nothing from this.  So, it is silly to accuse them of trying to pull a fast one.

sandsy

The only fast one they are pulling is trying to get your wife to do the work of getting another quote.
The requirement is for the firm to do all the work of finding the best quote in the market. They might have to ask her some questions to do that (e.g. they might be able to find a better quote on health grounds)  but she can refuse to answer their questions and they just have to do it based on what they know about her (e.g. her age and postcode).

Gazoza

My appreciation for all the comments.

Firstly, the type of policy. 

The original NPI policy documents clearly state that they are approved by the Board of Inland Revenue under section 226 of ICTA 1970 and that are Self-Employed Retirement Plans, plus several Phoenix letters are headed "Phoenix Life Section 226" or similar (so that is what makes us think they are section 226). We have letters from NPI (1999) and Phoenix (2014) stating, respectively, "NPI's Self-Employed Retirement Plans provide a guaranteed annuity at retirement. NPI does not and has never offered guaranteed annuity rates on any of its Personal Pension range." and "Phoenix's With Profit Self-Employed Retirement Plans (SERP's) provide a guaranteed annuity at retirement. Please note that SERP's do not contain guaranteed annuity rates".

To be clear, these policies have guaranteed yearly pensions (as actual stated monetary amounts, not as annuity rates) which were stated for ages 60, 65 & 70 based on single life, level pensions, annually in arrears, no guaranteed period. The guaranteed pensions amounts are not fluctuating as things stand (no new bonuses are being added for many years) but the transfer values do move around (no value is quoted explicitly as a "fund value").

Secondly
Phoenix stated (to my wife, on Wednesday this week) that they had to refer all annuity / pension plans to a third party for alternative quotes, following a change in the FCA regulations from 2019, for a mandatory comparison.

Thirdly
"they have to check the rate and compare with generic rates on the open market and tell your wife whether the in-house terms are the best available or not" (from dunstonh's post). Well, she already has in writing from Phoenix less than 3 weeks ago that there was nothing (literally £0.00) to gain by transferring elsewhere. 

dunstonh

To be clear, these policies have guaranteed yearly pensions (as actual stated monetary amounts, not as annuity rates) which were stated for ages 60, 65 & 70 based on single life, level pensions, annually in arrears, no guaranteed period. The guaranteed pensions amounts are not fluctuating as things stand (no new bonuses are being added for many years) but the transfer values do move around (no value is quoted explicitly as a "fund value").

It is not GMP though.   That is what confused the earlier posters.   It is not a GAR either but for all intents and purposes, it has a similar outcome.  

Phoenix stated (to my wife, on Wednesday this week) that they had to refer all annuity / pension plans to a third party for alternative quotes, following a change in the FCA regulations from 2019, for a mandatory comparison.Phoenix don't have an in-house team that do this. They use a third party company for it.  Quite a few do this nowadays.

"they have to check the rate and compare with generic rates on the open market and tell your wife whether the in-house terms are the best available or not" (from dunstonh's post). Well, she already has in writing from Phoenix less than 3 weeks ago that there was nothing (literally £0.00) to gain by transferring elsewhere. Are you saying that your wife has already completed the medical details and they have completed the comparison on the selected terms and written saying that the annuity they offer is the highest available?  (not that it can be relied on for being accurate).   

Marcon

dunstonh said:

My wife has a small Section 226 Self Employed Retirement Plan (fund value approx. £20k) with Phoenix (ex NPI). This policy has a Guaranteed Minimum Pension. 

As mentioned, it cannot have GMP as its a S226.  However, I have something ticking away at the back of my head that makes me think that NPI used to refer to their GAR as guaranteed minimum pension.    So, a terminology blip.  i.e. its not GMP but a GAR with a bad  internal name.

They did. There was a previous post on this forum where the confusion caused by the terminology was endless! In vain did the poor person posting the query keep trying to make everyone understand that was what the paperwork said...