An annuity is the technical term for an annual retirement income paid by pension plan providers to their clients. There are a wide range of annuities available. Some of them provide a proportion of the person’s income to his or her partner or dependants following upon the person’s death.
Importance of Proper Advice
With proper advice, a person can choose an annuity that suits their needs. However, if proper advice is not provided on the annuities available or the administration of a specific annuity going forward, then pension provider clients can be left feeling aggrieved and claims against the pension provider (or IFA) for negligent advice may arise.
The Financial Services Ombudsman recently published a case study on the type of annuities’ complaints they receive. Most complaints involve customers receiving a lower income than they had originally expected.
So why are customers receiving a much lower income under their annuities than originally projected? The size of annuities payments depends on several factors, including the consumer’s age and life expectancy, interest rates and the type of policy the consumer wishes to take out.
The reason for annuity payments being low in the recent years has been a result of the life expectancy improving significantly and interest rates being low. If a consumer was not properly advised at the time of taking out an annuity of these factors, then he or she may have taken out an annuity without realising that the annual income may vary.
Loss of Guaranteed Annuity Rate
Another common complaint that the FOS has received is the failure to highlight to consumers with guaranteed annuity rates that they may lose these if they change pension providers. Often customers are advised of all the potential benefits of changing providers without highlighting the downsides. As a result, the consumer can be left thinking that changing pension providers can only bring benefits.
In other cases the consumer could have been eligible for guaranteed annuity rates but was not advised of this and as a result lost out on these rates.
It is important to keep in mind that before any complaint can be made to the FOS, the financial adviser or pension provider complained of has to be given an opportunity to deal with the complaint. Only when they have provided their final response letter, can the matter be taken on to the FOS.
A lot of individuals make their FOS complaints on their own without any professional advice. The FOS website also provides good information on how to make a complaint. If the complaint is fairly complex and/or the sums involved fairly substantial (towards the £150,000 FOS limit), it is worth considering the benefits of obtaining professional advice on preparing the complaint and corresponding with the FOS thereafter to increase the prospects of a favourable FOS decision.
It should also be borne in mind that Court action may also be considered as a way to seek recovery for losses sustained from alleged annuity mis-selling.
Please note that this article only provides a general overview of recent annuities complaints made to the FOS. If you are seeking specific advice on making an annuities complaint, please do not hesitate to contact our Dispute Resolution team on 0131 226 8200 to see whether we may be able to assist you.
Disclaimer: While every effort has been made to ensure the accuracy of this blog post, it is not intended to provide legal advice as individual situations will differ. No recipients of content in this blog post should act or refrain from acting on the basis of the blog post without seeking the appropriate legal advice on the particular facts and circumstances at issue from a qualified solicitor in their jurisdiction. The blog post is for general information only and is not legal advice. The law changes frequently and varies from jurisdiction and jurisdiction. No solicitor-client relationship is formed nor should any such relationship be implied. If you require legal advice, please consult with a solicitor qualified to practise in your jurisdiction. Should you be interested in seeking our assistance with a legal matter, please contact the Dispute Resolution team on 0131 226 8200.