Pension annuity balls up - forget it or not?
Discussion
http://www.dailymail.co.uk/news/article-2479057/Cr...
This story in the Mail today reminded me of something I've been asked to look at by the OH's mother a couple of weeks back. As ever i'm sure I can get some frank advice here, my knowledge of pensions is limited to say the least!
I'll try and keep it brief:
The OH's mother has asked me to look at it as she is receiving a lot less than she was expecting (just the 50% of protected rights). To put it bluntly, neither of them understood pensions/annuities at all, but her recollection of the meeting with the pension provider was that her husband made it clear that all he was concerned about was that she had sufficient income once he died, and therefore wanted a joint income policy.
On one hand I thought, well he's signed the proposal off so it was his responsibility ultimately to ensure sufficient income was going to be provided to his spouse when he died. But on the other hand, has the provider acted appropriately in putting forward a proposal which provides only £25 a month (50% protected rights) to his spouse in the event of his death, especially given his poor health?
Is it worth approaching the provider to see what notes they have on file from the meeting or should I just tell her to move on?
This story in the Mail today reminded me of something I've been asked to look at by the OH's mother a couple of weeks back. As ever i'm sure I can get some frank advice here, my knowledge of pensions is limited to say the least!
I'll try and keep it brief:
- The OH's father retired at 65 in 2008 with a small pension pot (approx £90k, of which I believe he took approx £20k as a lump sum).
- He wasn't a well man but had only been diagnosed with emphysema at that time. He passed away in May 2012 (cancer).
- As I understand it (I wasn't around) he met with the pension provider in 2008 who gave him the option of taking an annuity with their recommended provider or open market option etc
- The annuity he has signed off was with their recommended provider and is split between protected/non protected rights. For the protected rights fund it states it provides no income to his spouse in the event of his death. 50% of the protected rights fund was earmarked as income for his spouse after he dies (which she now gets).
The OH's mother has asked me to look at it as she is receiving a lot less than she was expecting (just the 50% of protected rights). To put it bluntly, neither of them understood pensions/annuities at all, but her recollection of the meeting with the pension provider was that her husband made it clear that all he was concerned about was that she had sufficient income once he died, and therefore wanted a joint income policy.
On one hand I thought, well he's signed the proposal off so it was his responsibility ultimately to ensure sufficient income was going to be provided to his spouse when he died. But on the other hand, has the provider acted appropriately in putting forward a proposal which provides only £25 a month (50% protected rights) to his spouse in the event of his death, especially given his poor health?
Is it worth approaching the provider to see what notes they have on file from the meeting or should I just tell her to move on?
In my opinion it is certainly worth asking whoever established the annuity (the provider as you say or if it was an adviser) to confirm that the ultimate design of the annuity was fully understood by all parties.
A lifetime annuity is a one-off decision and you have to make all the choices (where available) when you buy it and these can't be changed later if you get the choices wrong.
As the article says in some instances people choose a single life annuity as a joint life plan will reduce the level of income paid i.e. it becomes a cost to the amount of money available and people don't always expect to die early. This should be documented by whoever set up the annuity.
In 2008 protected rights funds had to provide a 50% spouses annuity by law there was no choice on this aspect (NB this rule no longer exists it was abolished from 6th April 2012) but the non-protected rights were available to choice as a single or joint life annuity.
It should also have been established whether your OH's father would have qualified for an enhanced annuity (a higher rate of income could perhaps have been secured due to a medical condition that would ultimately shorten life expectancy)
A letter should have been issued by the provider/adviser in 2008 confirming the basis of their advice to take a single non-protected rights annuity. Can you find any correspondence relating to the purchase of the annuity? If not ask for evidence from the provider /adviser.
It's possible everything was explained and simply the wrong choice was made by your OH's father in spite of advice but this should be questioned.
Good luck hope this helps.
A lifetime annuity is a one-off decision and you have to make all the choices (where available) when you buy it and these can't be changed later if you get the choices wrong.
As the article says in some instances people choose a single life annuity as a joint life plan will reduce the level of income paid i.e. it becomes a cost to the amount of money available and people don't always expect to die early. This should be documented by whoever set up the annuity.
In 2008 protected rights funds had to provide a 50% spouses annuity by law there was no choice on this aspect (NB this rule no longer exists it was abolished from 6th April 2012) but the non-protected rights were available to choice as a single or joint life annuity.
It should also have been established whether your OH's father would have qualified for an enhanced annuity (a higher rate of income could perhaps have been secured due to a medical condition that would ultimately shorten life expectancy)
A letter should have been issued by the provider/adviser in 2008 confirming the basis of their advice to take a single non-protected rights annuity. Can you find any correspondence relating to the purchase of the annuity? If not ask for evidence from the provider /adviser.
It's possible everything was explained and simply the wrong choice was made by your OH's father in spite of advice but this should be questioned.
Good luck hope this helps.
Good advice from Stever.
I suspect there was no advice, the annuitant was provided with options by the provider, and picked an option. There should have been a guarantee period, i.e. that the full income is guaranteed for this period in any case, but it may only have been for five years I suppose.
Definitely worth asking the provider for evidence that the annuitant understood what they were doing and seeing the signed forms.
I suspect there was no advice, the annuitant was provided with options by the provider, and picked an option. There should have been a guarantee period, i.e. that the full income is guaranteed for this period in any case, but it may only have been for five years I suppose.
Definitely worth asking the provider for evidence that the annuitant understood what they were doing and seeing the signed forms.
Thanks both.
I have the annuity schedule he signed in front of me. The covering letter from the pension provider says "this is the annuity we have chosen for you, but you have other options (Market option, defer, take a triviality payment, contact us for an alternative quote).
My best guess is that he asked the adviser if his wife would receive an income if he died and he said yes based on the fact she would get the protected rights element of it. I'll have to ask her whether any enhancement was discussed based on his medical condition.
I'll think i'll draft a letter anyway just asking them if they have any evidence of what was discussed at the meeting and the decision process. It looks like the company (Pearl) has been taken over by another provider so it may prove difficult.
Why don't parents discuss these things with their kids when they don't understand something, stubborn gits!!
I have the annuity schedule he signed in front of me. The covering letter from the pension provider says "this is the annuity we have chosen for you, but you have other options (Market option, defer, take a triviality payment, contact us for an alternative quote).
My best guess is that he asked the adviser if his wife would receive an income if he died and he said yes based on the fact she would get the protected rights element of it. I'll have to ask her whether any enhancement was discussed based on his medical condition.
I'll think i'll draft a letter anyway just asking them if they have any evidence of what was discussed at the meeting and the decision process. It looks like the company (Pearl) has been taken over by another provider so it may prove difficult.
Why don't parents discuss these things with their kids when they don't understand something, stubborn gits!!
Sargeant Orange said:
Thanks both.
I have the annuity schedule he signed in front of me. The covering letter from the pension provider says "this is the annuity we have chosen for you, but you have other options (Market option, defer, take a triviality payment, contact us for an alternative quote).
My best guess is that he asked the adviser if his wife would receive an income if he died and he said yes based on the fact she would get the protected rights element of it. I'll have to ask her whether any enhancement was discussed based on his medical condition.
I'll think i'll draft a letter anyway just asking them if they have any evidence of what was discussed at the meeting and the decision process. It looks like the company (Pearl) has been taken over by another provider so it may prove difficult.
Why don't parents discuss these things with their kids when they don't understand something, stubborn gits!!
Was the annuity advised or non- advised?I have the annuity schedule he signed in front of me. The covering letter from the pension provider says "this is the annuity we have chosen for you, but you have other options (Market option, defer, take a triviality payment, contact us for an alternative quote).
My best guess is that he asked the adviser if his wife would receive an income if he died and he said yes based on the fact she would get the protected rights element of it. I'll have to ask her whether any enhancement was discussed based on his medical condition.
I'll think i'll draft a letter anyway just asking them if they have any evidence of what was discussed at the meeting and the decision process. It looks like the company (Pearl) has been taken over by another provider so it may prove difficult.
Why don't parents discuss these things with their kids when they don't understand something, stubborn gits!!
If your dad delt directly with Pearl, it would have been non -advised, he would have ticked a box & sent the form back.
darreni said:
Sargeant Orange said:
Thanks both.
I have the annuity schedule he signed in front of me. The covering letter from the pension provider says "this is the annuity we have chosen for you, but you have other options (Market option, defer, take a triviality payment, contact us for an alternative quote).
My best guess is that he asked the adviser if his wife would receive an income if he died and he said yes based on the fact she would get the protected rights element of it. I'll have to ask her whether any enhancement was discussed based on his medical condition.
I'll think i'll draft a letter anyway just asking them if they have any evidence of what was discussed at the meeting and the decision process. It looks like the company (Pearl) has been taken over by another provider so it may prove difficult.
Why don't parents discuss these things with their kids when they don't understand something, stubborn gits!!
Was the annuity advised or non- advised?I have the annuity schedule he signed in front of me. The covering letter from the pension provider says "this is the annuity we have chosen for you, but you have other options (Market option, defer, take a triviality payment, contact us for an alternative quote).
My best guess is that he asked the adviser if his wife would receive an income if he died and he said yes based on the fact she would get the protected rights element of it. I'll have to ask her whether any enhancement was discussed based on his medical condition.
I'll think i'll draft a letter anyway just asking them if they have any evidence of what was discussed at the meeting and the decision process. It looks like the company (Pearl) has been taken over by another provider so it may prove difficult.
Why don't parents discuss these things with their kids when they don't understand something, stubborn gits!!
If your dad delt directly with Pearl, it would have been non -advised, he would have ticked a box & sent the form back.
If they have just ticked the box and sent it back then that may be the end of the road. This happens far too often unfortunately; if an IFA was involved and the conversation weant as you think it did then he should have covered all the bases in his report and recommendation. wouldn't have impacted on his remuneration either, so not pocket driven.
Sargeant Orange said:
I think you are correct, it was non-advised as the schedule states "You have not received any advice from a representative at Pearl, however Pearl will get a commission payment from the annuity provider".
It was non advised, he didn't receive formal advice and he chose it so which adviser are you going to complain about?Its a bit like if you pull out your own teeth you cant expect compensation for pulling them out badly. Had you used a dentist/adviser you probably could.
Sargeant Orange said:
I think you are correct, it was non-advised as the schedule states "You have not received any advice from a representative at Pearl, however Pearl will get a commission payment from the annuity provider".
Pearl were a home service company & disbanded their sales force in 2000/2001. Your parents would not have received advice as Pearl were not authorised to offer it at the time the annuity was taken.
I'm not sure how pearl would receive a commission payment from the annuity provider as they were the annuity provider.
darreni said:
Pearl were a home service company & disbanded their sales force in 2000/2001.
Your parents would not have received advice as Pearl were not authorised to offer it at the time the annuity was taken.
I'm not sure how pearl would receive a commission payment from the annuity provider as they were the annuity provider.
Thanks Darreni, that's interesting as it definitely says Pearl are the pension provider and Prudential are the annuity provider. The covering letter from Pearl starts "as administrators of your personal pension scheme we are responsible for selecting an annuity provider for you upon your retirement".Your parents would not have received advice as Pearl were not authorised to offer it at the time the annuity was taken.
I'm not sure how pearl would receive a commission payment from the annuity provider as they were the annuity provider.
Speaking to the OH's mother, it was also Pearl who visited them when the annuity was taken in 2008.
I think it's clear he hasn't received advice, so i'll put it down to him not understanding the protected/non-protected rights elements and leave it at that I think. Just a shame he didn't speak to anyone about it at the time
Sargeant Orange said:
Thanks Darreni, that's interesting as it definitely says Pearl are the pension provider and Prudential are the annuity provider. The covering letter from Pearl starts "as administrators of your personal pension scheme we are responsible for selecting an annuity provider for you upon your retirement".
I think that:a) the initial contract that they would have had with Pearl would have required them to provide an annuity in some form (but of course other options are available)
b) Pearl stopped writing annuities directly, but had a relationship with Prudential where annuities were transferred (or reinsured) to them.
Edited by sidicks on Saturday 2nd November 20:03
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