Friends Life makes extra annuity payment after direct deal 'mistake'
Friends Life has agreed to make an extra annual payment to an annuitant after an adviser complained that the provider had contacted the client directly and sold them an annuity lower than they could have gained from shopping around.
As a result, Friends has agreed to pay the £575 per year difference between the pension scheme offered to one of his clients and the rate the client could have received through the Open Market Option.
In April, 2011, Friends Provident sent a letter to a client of Ward House principal Michael Ward informing them of an enhanced annuity option provided by Partnership.
The client was part of a Friends Provident Group Pension scheme which was serviced by Ward House.
Partnership advised it was not able to offer an enhanced or impaired annuity because the client was in good health and as a result the client took pension benefits with Friends.
The client had a pension pot of £63,104.42 and through the annuity offered by Friends begun receiving a gross annual payment of £3,128 from their retirement date in June.
Ward then contacted Friends informing them that through the OMO, the client could have received a further £575.40 per year.
Following involvement from both the adviser’s compliance provider Bankhall and his local MP Andrew Turner, Friends agreed to increase the client’s pension by the amount they had been disadvantaged.
A letter was also sent to Ward confirming that Friends would be making a payment to his firm of £526.67 which reflected the amount of commission his firm would have received on purchase of the annuity.
Friends says the direct contact was a mistake and that the pilot scheme with Partnership was only supposed to apply to orphan clients.
Ward says: “It is not right that life companies contact clients directly and offer them deals like this because the client does not understand and firm’s are taking advantage of that. The case in point is clearly one which required advice.”
Ward has also expressed concern that Friends has contacted another of his clients in the same way.
A Friends Life spokesman says: “Friends Life is running a pilot under which customers approaching retirement can be referred to Partnership for the option of taking out an enhanced annuity if it is likely that they will be eligible for this type of annuity.
“We are aware of a specific case where we failed to send some of this information to an adviser at the same time that we sent it to the customer. In this case, as a gesture of goodwill, we made a payment to the adviser to reflect the commission that would have otherwise been paid. This was an error as our normal practice is to send information to the adviser at the same time as the customer.”