Pension mis-selling in the 90s

NSG666

Back in the 90s my wife was persuaded to take out a pension with an insurance company rather than join her DB pension scheme. A lot of this was going on then the poop hit the fan as these companies were considered to have mis-sold their pension policies by giving bad advice to their clients. Many of you will remember and be aware of this and that people were advised to contact their pension provider and put in a claim for pension mis-selling.

My wife did this and the company held it's hands up and agreed that indeed they had mis-sold her a pension. They then contacted her employer to get details of the value of the benefits she had missed out on. Because she wasn't allowed to buy back years in her DB scheme they calculated a lump sum and put that into the pension pot held with them. The letter she received at the time went on the lines of "you've missed out on 7 years with your DB scheme which we calculate to be worth £xxx so we have put that amount into your pension held with us."

I'm getting to the point now hold on. Wind on to today, and the value of that pension pot will no where near buy the income that she would have had by being in the DB scheme. I don't have the exact figures but lets say 7 additional years in the DB scheme would have increased her monthly income by £200 but the value of her insurance pension pot would only buy an annuity paying £100/month. I think that's good grounds to be able to go back to the insurance company and say I want more money putting into the pot or, better still, you take the pot and just pay £200/month.

Is anyone aware of any precedent being set on this? Is my logic flawed?

Thanks 

Joey_Soap

My wife fell victim to CoOp Financial advisors transferring her deferred DB pension away from a FTSE100 firms pension scheme to an insurance company unitised with profits pension. It was a disaster. I didn't wait as long as you have, but my complaint was upheld by the financial advisors who put my wife back in the position she had been had she not taken their advice. Luckily the trustees of the FTSE100 firm pension went along with this and I guess it cost the advisory company a great deal of money. My wife has now retired and it's like she never did the mis-advised transfer. I think she was lucky. But there's thousands of cases like hers. Good luck.

Dazed_and_C0nfused

My wife has now retired and it's like she never did the mis-advised transfer.

As in the FTSE pay her under the DB rules or the insurance company have increased their payments to match what the DB scheme would pay?

tacpot12

There is nothing to stop her asking for more compensation, but if the reason that the fund is not able to match what the DB scheme would pay is the investment performance or the fact that annuity rates have dropped, I'm not sure she will be entitled to any more compensation. She should ask, and then complain, and then go to the Finacial Ombudsman if the company doesn't compensate her, and then you will know. 

dunstonh

Wind on to today, and the value of that pension pot will no where near buy the income that she would have had by being in the DB scheme. I don't have the exact figures but lets say 7 additional years in the DB scheme would have increased her monthly income by £200 but the value of her insurance pension pot would only buy an annuity paying £100/month. I think that's good grounds to be able to go back to the insurance company and say I want more money putting into the pot or, better still, you take the pot and just pay £200/month.

The redress was to put her back in the position she would have been had the advice not been given.

It isn't possible in some cases to get exactly what you had before if the scheme would not accept rejoining and a lump sum to return benefits.  This means a chunk of the money needs to be invested.  And the redress was based on investments achieving x% pa. and an annuity rate prevalent at the time.

However, things have moved on.  Most people do not buy annuities anymore.   Instead, you have this pot of money you would not have if your wife had not transferred out.   You don't mention the fund value but that is more important than an annuity rate.  That assumes it is an actual annuity rate and you are not using statement projections (which artificially show lower values. Sometimes 5x lower than real world).  So, what is the fund value?

So, actually, you could be potentially better off because of the changes rather than worse off.  Or have options open that you would not have had it remained in the scheme.  Or you could be a lot worse off.

Most redress payments of that era were done on the basis of the person accepting the redress as a full and final settlement.  Meaning you cant go back later and ask for more.   There was one salesforce I am aware of that did do a secondary check at scheme retirement age and could pay more if necessary. But you had to meet qualifying criteria (along the lines of having not transferred your pension away from them during the term, not changed the investments and only at scheme retirement age. Not if you commenced retirement earlier).    So, there is no harm in asking the question but work on the basis of being rejected as a previous settlement was final.

Joey_Soap

Dazed_and_C0nfused said:

My wife has now retired and it's like she never did the mis-advised transfer.

As in the FTSE pay her under the DB rules or the insurance company have increased their payments to match what the DB scheme would pay?

The advisory firm paid the scheme trustees to take her back. Luckily, the scheme trustees agreed. It will have cost the advisors a lot of money but I don't know how much.

NSG666

dunstonh said:

Wind on to today, and the value of that pension pot will no where near buy the income that she would have had by being in the DB scheme. I don't have the exact figures but lets say 7 additional years in the DB scheme would have increased her monthly income by £200 but the value of her insurance pension pot would only buy an annuity paying £100/month. I think that's good grounds to be able to go back to the insurance company and say I want more money putting into the pot or, better still, you take the pot and just pay £200/month.

The redress was to put her back in the position she would have been had the advice not been given.

It isn't possible in some cases to get exactly what you had before if the scheme would not accept rejoining and a lump sum to return benefits.  This means a chunk of the money needs to be invested.  And the redress was based on investments achieving x% pa. and an annuity rate prevalent at the time.

However, things have moved on.  Most people do not buy annuities anymore.   Instead, you have this pot of money you would not have if your wife had not transferred out.   You don't mention the fund value but that is more important than an annuity rate.  That assumes it is an actual annuity rate and you are not using statement projections (which artificially show lower values. Sometimes 5x lower than real world).  So, what is the fund value?

So, actually, you could be potentially better off because of the changes rather than worse off.  Or have options open that you would not have had it remained in the scheme.  Or you could be a lot worse off.

Most redress payments of that era were done on the basis of the person accepting the redress as a full and final settlement.  Meaning you cant go back later and ask for more.   There was one salesforce I am aware of that did do a secondary check at scheme retirement age and could pay more if necessary. But you had to meet qualifying criteria (along the lines of having not transferred your pension away from them during the term, not changed the investments and only at scheme retirement age. Not if you commenced retirement earlier).    So, there is no harm in asking the question but work on the basis of being rejected as a previous settlement was final.

Ok I've pulled together the latest info I have and I should have said 80s not 90s in my title. Just to point out up front that she is c 3.5 years away from taking benefits (if she decides to take them at 60 but it won't be before). Where I've show calcs it's to check my understanding rather than me thinking anyone is thick. Sorry it's small fry numbers her pensions have been a bit of a disaster first opting for AVCs with Equitable Life then choosing London Life when Equitable went pear shaped. Anyway she:

Was in insurance scheme 1/6/89 to 1/5/96 (6yrs 11 months)
Was in DB scheme 1/4/96 to 22/6/02 (6yrs 2 months)

Last DB statement from Jan 19 said she would get £2116 pa from Jan '20 (age 55) - this had an early retirement reduction at 80% so if she'd been 60 the sum would be 2116/.8 = £2645 c. £220/month

As of today the personal pension pot is £54,186
This is the original scheme investment taken out in 1989 and has not been touched by her since.

Her leaving her employer in 2002 triggered something from the personal pension provider and a letter in 2005 saying we've calculated the loss and a lump sum has been put in. "Payment as above discharges our guarantee and concludes our review of your personal pension" However, we've kept all previous correspondence and in the letter she signed in 1998 it says

"Therefore we offer to guarantee to make good any loss you suffer;
either by buying back lost benefits in the (DB scheme)......
or
by ensuring that you XXXXX personal pension is large enough when you retire to pay you benefits of corresponding value to to those you have lost"

Using a calc of 83/74 months in PP/months in DB = 1.122*£220 = £247/month lost by taking out the PP rather than the DB scheme.

She signed nothing in 2005 so the way I see it the original agreement from 1998 should still stand i.e. any losses are calculated when the DB is taken.

We've not even thought about contacting the PP provider at the moment I've posted on here simply to get feedback and in case this topic has been covered recently (with any success stories or otherwise) as there must be '000s of others that are similarly affected.

Albermarle

As of today the personal pension pot is £54,186

If you did not use this to buy an annuity, which are poor value , but instead used a drawdown scheme.

In this case you should be able to generate an income quite similar to the ones you quote for the DB scheme, and inflation linked as well . 

However the rub is that this drawdown income is not guaranteed in the way the DB scheme income would have been .

This is the original scheme investment taken out in 1989 and has not been touched by her since 

How the pension pot has been invested in the intervening years could be significant  . The difference between how a well invested and a poorly invested pot would perform over so many years ( >30) could be huge . Also by leaving it in an old pension then charges have probably been significantly higher than if it had been transferred .

The fact that you have not actively monitored the pension in 30 years, would probably count against you in a complaint situation, and has probably meant you have ended up with a smaller pot than you could have had maybe.

Thrugelmir

NSG666 said:

dunstonh said:

Wind on to today, and the value of that pension pot will no where near buy the income that she would have had by being in the DB scheme. I don't have the exact figures but lets say 7 additional years in the DB scheme would have increased her monthly income by £200 but the value of her insurance pension pot would only buy an annuity paying £100/month. I think that's good grounds to be able to go back to the insurance company and say I want more money putting into the pot or, better still, you take the pot and just pay £200/month.

The redress was to put her back in the position she would have been had the advice not been given.

It isn't possible in some cases to get exactly what you had before if the scheme would not accept rejoining and a lump sum to return benefits.  This means a chunk of the money needs to be invested.  And the redress was based on investments achieving x% pa. and an annuity rate prevalent at the time.

However, things have moved on.  Most people do not buy annuities anymore.   Instead, you have this pot of money you would not have if your wife had not transferred out.   You don't mention the fund value but that is more important than an annuity rate.  That assumes it is an actual annuity rate and you are not using statement projections (which artificially show lower values. Sometimes 5x lower than real world).  So, what is the fund value?

So, actually, you could be potentially better off because of the changes rather than worse off.  Or have options open that you would not have had it remained in the scheme.  Or you could be a lot worse off.

Most redress payments of that era were done on the basis of the person accepting the redress as a full and final settlement.  Meaning you cant go back later and ask for more.   There was one salesforce I am aware of that did do a secondary check at scheme retirement age and could pay more if necessary. But you had to meet qualifying criteria (along the lines of having not transferred your pension away from them during the term, not changed the investments and only at scheme retirement age. Not if you commenced retirement earlier).    So, there is no harm in asking the question but work on the basis of being rejected as a previous settlement was final.

As of today the personal pension pot is £54,186
This is the original scheme investment taken out in 1989 and has not been touched by her since.

There's the crux. 32 years has past since. Unfortunately it's not now possible to say if only I had with hindsight.  

NSG666

Albermarle said:

As of today the personal pension pot is £54,186

If you did not use this to buy an annuity, which are poor value , but instead used a drawdown scheme.

In this case you should be able to generate an income quite similar to the ones you quote for the DB scheme, and inflation linked as well . 

However the rub is that this drawdown income is not guaranteed in the way the DB scheme income would have been .

This is the original scheme investment taken out in 1989 and has not been touched by her since 

How the pension pot has been invested in the intervening years could be significant  . The difference between how a well invested and a poorly invested pot would perform over so many years ( >30) could be huge . Also by leaving it in an old pension then charges have probably been significantly higher than if it had been transferred .

The fact that you have not actively monitored the pension in 30 years, would probably count against you in a complaint situation, and has probably meant you have ended up with a smaller pot than you could have had maybe.

Yes I agree that it might be possible but riskier to get similar / better returns and also that the pot can be passed on upon death but I don't think she'd be able to do that herself and I think she'd be more comfortable with this part of her pension being annuity. The other factor would be how the PP pot compares to the DB CETV which was £73000 in Jan 2019.

I'm not saying you are wrong in your last sentence but I'm inclined to entirely disagree. I think the onus should have been on the PP provider to do what was necessary rather than it being left to an inexperienced investor to try and make the best of a bad situation they created. There's risk to get the reward and the DB was pretty much risk free. If she had tinkered to get better returns and it had gone wrong then they certainly would have had some wriggle room to say 'no longer a problem of our making'

NSG666

Thrugelmir said:

NSG666 said:

dunstonh said:

Wind on to today, and the value of that pension pot will no where near buy the income that she would have had by being in the DB scheme. I don't have the exact figures but lets say 7 additional years in the DB scheme would have increased her monthly income by £200 but the value of her insurance pension pot would only buy an annuity paying £100/month. I think that's good grounds to be able to go back to the insurance company and say I want more money putting into the pot or, better still, you take the pot and just pay £200/month.

The redress was to put her back in the position she would have been had the advice not been given.

It isn't possible in some cases to get exactly what you had before if the scheme would not accept rejoining and a lump sum to return benefits.  This means a chunk of the money needs to be invested.  And the redress was based on investments achieving x% pa. and an annuity rate prevalent at the time.

However, things have moved on.  Most people do not buy annuities anymore.   Instead, you have this pot of money you would not have if your wife had not transferred out.   You don't mention the fund value but that is more important than an annuity rate.  That assumes it is an actual annuity rate and you are not using statement projections (which artificially show lower values. Sometimes 5x lower than real world).  So, what is the fund value?

So, actually, you could be potentially better off because of the changes rather than worse off.  Or have options open that you would not have had it remained in the scheme.  Or you could be a lot worse off.

Most redress payments of that era were done on the basis of the person accepting the redress as a full and final settlement.  Meaning you cant go back later and ask for more.   There was one salesforce I am aware of that did do a secondary check at scheme retirement age and could pay more if necessary. But you had to meet qualifying criteria (along the lines of having not transferred your pension away from them during the term, not changed the investments and only at scheme retirement age. Not if you commenced retirement earlier).    So, there is no harm in asking the question but work on the basis of being rejected as a previous settlement was final.

As of today the personal pension pot is £54,186
This is the original scheme investment taken out in 1989 and has not been touched by her since.

There's the crux. 32 years has past since. Unfortunately it's not now possible to say if only I had with hindsight.  

Sorry I don't understand what you mean by this, in their letter dated 1998 it implied that losses would be calculated at retirement.