The letter that can help you beat the annuity bandits
HUNDREDS of pensioners have backed The Mail on Sunday’s campaign calling for insurance companies to compensate all customers who were railroaded into taking out inappropriate pension annuities, going back to the early 2000s.
Launched last week in the wake of a £23.9 million fine imposed on Prudential for mis-selling annuities from 2008, our Justice for Annuity Victims campaign has drawn overwhelming support – not only from readers bamboozled into poor-value annuities they cannot escape, but also from pension experts.
You have told us insurers are rejecting your complaints – even though the annuity you were sold failed to take into account serious illness. Other readers reported being offered ‘derisory’ compensation for an annuity that was mis-sold to a spouse who has since died. So today we have printed a template letter that you can send to insurers to spur them into action.
The Mail on Sunday is also urging the regulator – the Financial Conduct Authority – to extend its probe into the annuity market, following the multi-million pound fines imposed on Prudential and Standard Life Assurance (now owned by insurance consolidator Phoenix and fined £30.8 million in July ). All the evidence suggests that mi s-selling was endemic across the insurance industry. We believe that:
EVERY insurer should now be required by the FCA to review all past annuity sales to ensure customers ended up with the most appropriate plan. Where evidence of mis- selling is found, consumers should be offered immediate compensation (with interest) and be put in a position where future pension payments reflect the best deal they should have been offered at the time they annuitised.
ANY review should be allencompassing. It should identify financial detriment caused by:
a) Retirees not being told of their right to shop around for an annuity.
b) Consumers not being made aware of so- called enhanced annuities, which pay higher rates t o people with reduced l i fe expectancy as a result of poor health or a history of smoking.
c) Buyers not being informed of the existence of annuities that offer protection not just to themselves, but to their spouses.
FINALLY, the Government should resurrect a plan to allow all annuitants to cash them in. This was abandoned three years ago amid concerns consumers would not get value for money.
Jim Leith is among those who believe past annuity sales should be subject to an exhaustive review
by the regulator. A few days ago, he received a ‘derisory’ compensation offer of £110 from Prudential for the annuity sold to his late wife Kathleen in 2009, just five months before she died of heart failure.
Despite being given a mechanical heart valve at 25 and being told by doctors she was unlikely to see her 60th birthday, Kathleen was advised to buy a Prudential annuity with her pension fund when she hit 60. Though the annuity included a spouse’s benefit for Jim, it did not factor in her poor health, which stemmed from contracting rheumatic fever at birth, weakening her heart. The compensation offered to Jim represents the extra income Kathleen would have got if she had been sold the enhanced annuity she was entitled to.
But it does not mention any future increase to Jim’s spouse’s benefit to reflect what he would now be receiving had Kathleen been offered an appropriate annuity. ‘ I cannot think there are many other people on this planet who were more poorly advised to buy an annuity than Kathleen. I maintain she was coerced into taking one out,’ says Jim, 68.
Had Kathleen not bought an annuity, her pension fund would have gone to her estate. Jim says any compensation he eventually accepts from Prudential will go straight to the British Heart Foundation. Jim says: ‘This is no longer about money. It’s about justice for all victims of pension mis-selling.’
Other victims of annuity missales say they have been thwarted in getting financial justice. Last year, John Mould, a former vehicle salesman from Market Harborough in Leicestershire, took his case to the Financial Ombudsman Service, but got no joy.
John has two small Abbey Life annuities that are now administered by Phoenix. His claim was based on the fact that at no stage in the annuity buying process – long before Phoenix came on the scene – was he told about the availability of enhanced annuities. Given he suffered a heart attack at age 35, he would have qualified.
His complaint was rejected on the grounds that before he annuitised, Lloyds – Abbey’s owner at the time – sent him a booklet that had information on enhanced annuities.
John, who is meticulous about keeping all financial documents, insists he never received it. Yet the Ombudsman sided with the insurer. ‘I feel as if I have been shabbily treated,’ says John.
That is exactly how David Greenhalgh, 67, from Standish, Wigan, feels. His Prudential annuity was bought without anyone telling him of his right to shop around, or that he could get an enhanced annuity due to a history of high blood pressure and high cholesterol.
He has yet to be offered compensation by the Pru. ‘It is key that The Mail on Sunday keeps the pressure on these insurers,’ says David. ‘They should all be held to account.’
Billy Burrows is a pension specialist who has done much over the years to highlight the benefits of shopping around for an annuity.
On Friday, he said: ‘I welcome The Mail on Sunday’s timely campaign. As Jane Austen wrote in Sense And Sensibility, “an annuity is a very serious business”, but sadly too many pensioners have been seriously left out of pocket by the greed of insurers. It is only right that all people who were missold to in the past should now be compensated and their annuities changed. Justice must prevail.’
It is not just mis-selling that irks annuitants. Many readers say they should now be allowed to break free of their annuities by being offered a one- off cash sum in exchange for forgoing future income payments.
Some annuity providers, such as Rothesay Life and Phoenix, already allow this although it is restricted to those with low-value annuities.
‘My Aviva annuity pays me £80 a month,’ says widower Bill Kelly, from Wimbledon, in South- West London. ‘It is just enough to pay for a daily cup of coffee. I’d rather get a lump sum and be done with it.’
Others fear their annuity may end up in the hands of a firm they know little about. Colin Kenney, from Mullion, Cornwall, has a Pru annuity that pays him £114 a month.
But his annuity could in future be paid by Rothesay Life, a company set up 12 years ago and backed by private equity firm Blackstone. This is if the deal between Pru and Rothesay gets through the courts – it has been blocked once already.
‘I have a Pru annuity because the insurer is a strong financial brand,’ says Colin. ‘That’s the way I want things to stay. I’ve objected to the deal. Why do insurers think they can trample over people like me?’