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Advisers divided over FOS Sesame annuity ruling


Advisers are divided over the impact a FOS annuity misselling ruling against Sesame could have on retirement advice.

The FOS ruled Sesame had to pay Mr K’s widow almost £21,000 after admitting it provided unsuitable advice to a client prior to a major operation.

The firm reached the deal after the death of its client, when his widow referred the case to the FOS.

Sesame advised Mr K to buy a lifetime annuity before undergoing surgery.

However, Mr K died three months later, leaving his widow complaining that the firm should have waited until after the operation before giving advice on his savings of £64,178.

Details of Mr K’s health issues were not provided by the FOS.

But some are concerned advisers are being put in a difficult position.

Aspect 8 financial planner Claire Walsh says: “If it transpires the adviser overlooked serious health issues that’s a different case but it makes me nervous.

“Older people are frequently in and out of hospital with health issues. You can’t predict the chances of someone dying. I’ve had several clients that have had hip replacements and no-one would be panicking beforehand that they might die.”

But Intelligent Pensions technical director David Trenner says: “I think FOS is right. If you want to sell annuities you have to cover health issues.

“If you’re an adviser you have to actually look at what the medical questionnaire says. It should say there is an operation due and then you should be saying you have a choice – if you buy now and this condition isn’t as bad as you thought you’d get a better rate now. But if you buy now and it’s worse than you thought, then it’s poor value.

“I feel this may be a problem with networks generally because if things are done centrally this is the kind of information that may slip between the gaps.”

Sesame agreed the advice was unsuitable and offered Mrs K a lump sum of £11,516.81 based on its calculation of the total income likely to be received by the widow from the annuity in her lifetime.

However, when Mrs K rejected the settlement, the FOS agreed in a provisional decision that the offer “was neither fair nor reasonable”.

The watchdog instead suggested that Sesame pay the lump sum Mrs K would have received, less the annuity already paid out, and recommended the two parties come to an agreement through which she pay the firm the income already received.

However, because the annuity cannot be cancelled, and the provider is not allowed to direct payments to third parties, Sesame instead offered £2,700 for inconvenience and an increased lump sum of £18,288.60, while Mrs K would additionally keep her annuity.

While the FOS found the offer fair, Mrs K again rejected it, stating that she would only receive £269.49 per month for the guaranteed 10-year period of the annuity.

However, ombudsman Terry Connor upheld Sesame’s offer, meaning the firm must pay Mrs K £20,988.60 in total.


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There are 6 comments at the moment, we would love to hear your opinion too.

  1. Why are advisors divided?? this is individual case where customer had obvious health issues that weren’t considered. Sesame agreed and only argument was amount of redress. Nothing to divide- this customer needs compensating for poor advice.

  2. The jury is out, by those not privy to the case files !

    There is a hell of a lot of info missing in this article, there is no way one can even start to make judgement !!

    • I agree with DH, not enough info in the article to come to a clear opinion. The FOS case may make it no clearer. It all comes down to whether it was a routine medical operation or a significantly life threatening one for me.

  3. So I suppose that means that anyone advising someone to take an impaired health annuity is doing the wrong thing because actually they should tell the pension holder to hang-in there and die and give 100% benefits to the dependants… That said, we have always felt that giving the advice is the most important thing based on the circumstances – if the client then goes against that and proceeds regardless, hopefully the FOS would back that (there, I’m being naive again…).

  4. paolo standerwick 19th August 2015 at 1:22 pm

    This is a far cry to what the FOS were pushing only a year or two ago. The default position was annuities. They blow with the wind.

  5. Depends on what information was available or should have been requested.

    Assuming he knew it was a major operation there is always risk. Did he ask about the prognosis. If so, did he document this.

    I recall looking at a piece of advice a couple of years ago. Money was from father’s estate. If he had asked when father died, then he would have considered vulnerability.

    Sounds simple, but a lot of advice fails on the obvious.

    Really not enough data here to judge if advisers need to be concerned.

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