Pensions betrayal that left disabled widow a prisoner in her own home

THree years ago, Dawn Smith fell down the stairs at home and was left disabled. Due to osteoporosis, the 73-year- old widow shattered bones in her feet, ankles and legs, and spent six months in a wheelchair.

She now walks with a stick and is confined to the ground floor of her three-bedroom london home, where she’s turned the living room into a makeshift bedroom.

Dawn is desperate to use her pension for urgent home renovations that would mean she no longer has to sleep on a reclining chair, or rely on her daughter to help her wash by the sink.

But like millions of retirees, her life savings are locked into a pension annuity that she cannot access.

Her only option is to keep collecting her £113.53 monthly income — the guaranteed lifetime payout from the £29,000 annuity that she and her late husband David purchased with their life savings before he died of cancer in 2009.

Dawn has had her hopes of cashing in her annuity raised and dashed twice, in what her family describe as a ‘double betrayal’.

Two years ago, the Treasury announced savers would be able to sell back annuities to insurance companies from april 2017.

But the plans were shelved in October last year, causing crushing disappointment for pensioners such as Dawn, who felt a cash lump sum would be so much more valuable than a small monthly income for life.

Dawn then pleaded with her pension firm, aviva, to let her cash in her annuity pot — which she was told is worth £17,913 — to carry out the renovations. Hopes dashed: Dawn Smith with daughter Tracey It refused, but to help savers stuck with annuity instead offered her contracts they don’t want. two years’ annuity In 2015, the Government income upfront, or scrapped a rule that effectively £4,105, in lieu of forced most over-55s with stock the £113 monthly market-linked pension savings instalments. The to buy annuities on retirement. proposition, seen by But the same freedom to spend Money Mail, was the first your life savings as you want was known offer of its kind. not afforded to the five million But several weeks later, aviva people who had already locked in pulled the deal, saying it should to lifetime annuity deals. never have been offered because Dawn, of West london, says she it breached tax rules and its own is now at a loss as to how she can company rules. fund the repairs to her home. aviva told Money Mail: ‘This Describing her treatment as offer was made in error, and we ‘disgusting’, she says: ‘Being able are looking into the circumstances to cash in even £10,000 of my surrounding this.’ annuity would make a great deal It has now offered her £500 for of difference to my life. the ‘inconvenience’ she suffered. ‘There should be an exception Dawn’s case shows exactly why to the rules if you suddenly need Money Mail’s Unlock Our the money for medical reasons.’ Pensions campaign is calling on Dawn’s daughter Tracey Smith, pension firms, the Government 43, who lives with her mother and City regulators to find a way and her eight-year-old daughter so she can care for Dawn full-time, says: ‘ This has been very stressful for my mum. First she was let down by the Government, and now this.’

Dawn and David took out a joint annuity policy, which pays out to a spouse on death, using their entire life savings of £29,000 in 2003. David was diagnosed with bladder cancer in 2006, a year after retiring as a lorry driver, and died in 2009 aged 65. When the Government announced plans to let savers cash in, Dawn had hoped to use the pension to fund a £5,000 walk-in bath and a £40,000 house extension with a downstairs bedroom and bathroom.

‘My husband never would have taken out an annuity if he had known we could never get it out if we needed it,’ she says.

Ministers claimed that letting pensioners sell their incomes for lump sums would put them at risk of poor-value payouts.

Writing to Dawn, aviva warns it could cause ‘financial detriment to customers’ and would not be in their ‘best interests’.

But Dawn says: ‘I feel patronised by the suggestion that I cannot handle my own money.’

aviva said tax rules prevent it from offering two years’ worth of payments upfront.

Its earlier letter to Dawn had said: ‘ Due to your extenuating circumstances, [we] wanted to do something to help, especially as your council is not willing to pay for the home adaptations.

‘The result of our meetings with other managers is that they have agreed to offer you a lump sum of two years’ worth of payments. This would mean you would not receive payments for two years.’

However, aviva later referred Money Mail to HMrC’s Pension Tax Manual, which states that an annuity contract must ‘ be paid at least once a year, whether in advance or in arrears’.

aviva accepts that it could offer one year of payouts to Dawn up front, but is not willing to do so.

as well as the £500 gesture, it has offered to pay the costs of independent financial advice to help her find a solution.