I found this item on Citywire, about an adviser complaining about Prudential ‘realigning’ its retirement annuity contracts. The item is about a client with an old style retirement annuity contract with the Prudential, which includes guaranteed annuity rates (GAR’s).
Now normally this a good thing, but!! When the pension fund value was checked in February this year and again in early April and the value had dropped by some 25%, Prudential apparently stated that this was a ‘realignment’ of bonus rates particularly as the client’s previous fund value had been ’over inflated’. Not much good when it comes to buying annuities.
How can there be such a difference in fund values? The Prudential’s supporting letter refers to a reduction in values of somewhere around 5%, but when this was queried, they stated that the client’s true pension fund value (not the over inflated one) has indeed fallen by only 5%, but they had taken the 20% off first.
How can this have gone so wrong? As it’s not a Market Value Adjustment (MVA) there is little chance that the client will ever get a reasonable increase in fund value when the stock markets do pick up. The client is 60 soon and was going to take the benefits, only to be told that his tax-free cash entitlement has fallen by £10,000 and his projected annuity income by over £2,000 pa. The item asks if this move is to penalise the client for having guaranteed annuity rates.
The view is that this case will go on, with the adviser striving for a satisfactory outcome for their client. Let’s hope when you seek out annuity quotes to find the best annuity rates for your circumstances you don’t encounter such problems. Make sure you know what you’re getting into.
