A pension annuity open market option fiasco
An independent financial adviser (IFA) has launched an attack on Abbey Life for automatically vesting his client into its own pension annuity without the client’s consent. The IFA states that the client has major health problems and approached him after receiving literature urging him to take out a pension annuity with the closed-book provider (not offering or taking in new business) before retirement. While waiting for Abbey Life to accept his client’s letter of authority, the IFA says it became apparent it had vested the plan already but not paid out as the client had not signed any paperwork. The plan was vested on the worst possible terms (allegedly), with no tax-free cash, no widow’s option and the pension annuity income paid annually in arrears.
The IFA states that it is surely about time the Financial Services Authority (FSA) made the open market option for pension annuities the default option at retirement. This client was so confused with all the bits of paper. He was eligible for an enhanced annuity and would have got a far bigger payout elsewhere with much improved annuity rates.
Naturally Abbey Life wanted to defend their position, as Neil Tointon states: ”Many policy terms and conditions make it clear that the policy will be converted to an annuity at normal retirement date if we do not hear from the policyholder to the contrary.”
He would say that, wouldn’t he. The point is, though, that this client has lost out heavily in his pension annuity retirement income because the industry we are in has allowed this to happen, and this does need to change and soon.
