The Pensions Ombudsman has ruled that a complainant who says he decided to retire on the basis of inaccurate fund values and annuity quotes provided by Phoenix Life is not entitled to a pension based on that information.
Phoenix Life made a litany of errors in communications with Mr S, in which it projected fund values to age 75 not 65 and at times failed to incorporate the guarantee in its annuity quotes. Mr S argued that Phoenix Life should make good the difference between the quotes.
However, the ombudsman Anthony Arter has decided, on a balance of probabilities, that Mr S would not have acted differently and thus did not suffer a financial loss, and is therefore due only the limited compensation offered.
Catalogue of mistakes
The series of errors began in December 2015, after Mr S’ IFA wrote to Phoenix Life asking for a fund value projection and proposed annuity rates from the age of 65.
Phoenix Life provided a retirement option pack on 21 December that stated the benefits provided were projected to age 65, but were actually projected to 75.
On 17 February 2016, the life office sent a further quote showing that a projected guaranteed annuity was £19,300 ($25,168, €21,313) per annum as at 28 March 2017 from age 65.
Yet this was based on a fund value of £205,000 incorrectly projected to age 75.
On 22 June 2016, the life office sent another quote, which showed projected benefits to age 65 and a fund value of £211,644.55.
However, yet again, the fund value was projected to 75.
Mr S said that upon receiving the quotation, and following a discussion with his IFA, he gave formal notice to his employer that he would retire.
Then, on 26 July, a retirement option pack was issued with a projected fund value of £158,597.22. The annuity rate quoted was not calculated using a guaranteed annuity rate, so it was underquoted to be between £5,028.69 and £7,590.48.
On 2 September 2016, a further retirement pack was issued to Mr S confirming an annual annuity of between £6,685.82 and £6,707.60 based on a projected fund value of £154,519.24. Again, the company failed to use guaranteed annuity rates.
On 12 October 2016, Phoenix Life quoted Mr S an annuity of £13,920.41 pa calculated using guaranteed annuity rates based on a fund value of £154,519.24.
On 8 March 2017, Mr S complained to Phoenix Life. He said he was unhappy that the projected fund value quoted in October 2016 did not match those quoted earlier that year in February and June 2016.
On 15 March 2017, Phoenix Life wrote to Mr S and confirmed the error in projecting the fund value to 75.
Compensation offer
Following more correspondence and an initial offer of £200 compensation, Phoenix Life agreed to pay MR S £1,000 for quoting incorrect values and the delay in resolving his complaint, and to backdate his retirement to 28 March 2017.
It also agreed to pay the arrears on the annuity payments since 28 March 2018 with late payment interest of 8% net.
The adjudicator found that the provision of incorrect information was maladministration and this has been accepted. However, it also said that the ombudsman’s approach in cases like this is that members are only entitled to the correct benefits under the terms of the insurance policy and not the incorrect benefits quoted in error.
The adjudicator also thought it reasonable to conclude that Mr S should have been aware there was an error and have questioned the information that he was given. It noted that the figures quoted in February and June 2016 were vastly different to those quoted in July and September of that year and then further figures were provided in October 2016 which differed again.
The adjudicator also said that Mr S and his IFA should have questioned the fluctuation between February 2016 of £205,000 and in June of £211,644.55.
Not legally binding
The ombudsman backed the findings of the adjudicator saying that he did not find that the quotes represented a legally binding agreement.
He added: “In order to conclude that a complainant has suffered direct financial loss as a consequence of a misstatement made to them I have to be satisfied, on the balance of probabilities, that they reasonably relied upon the misstatement when making their decision and, had they known the correct state of affairs, they would have acted differently, the burden of proof is on the complainant.
“In this case I do not consider that Mr S has demonstrated, on a balance of probability, that he would have made a different decision to the one that he made had he been given the correct values.”
