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AVC quandary for pension victims over buyback deal

Victims of wound-up occupational pension schemes are being asked to sacrifice AVCs if they want to benefit from the Government’s deemed buyback benefit and are finding it impossible to get advice on the subject.

The deemed buyback option was highlighted by pensions minister James Purnell last year allowing qualifying members to have their ben-efits reinstated into the state pension scheme if the scheme cannot afford to provide a minimum level of benefits.

But victims wanting the buyback option have been asked by HM Revenue & Customs to give up any AVCs accrued under the scheme, leaving them to decide which choice would be best.

Pension campaigner Ros Altmann says the situation is particularly galling, considering how many IFAs were fined for selling free-standing AVCs when this route could have saved victims from losing these contributions.

She suggests that AVC advisers could have a case for redress against the FSA.

Under the Pensions Act 1995, AVCs were supposed to be top priority if a scheme wound up but Altmann says the rules have not been legally tested.

HMRC has sent letters to qualifying victims giving them estimates, which it stresses are not guaranteed, of what they would receive under the buyback option and advises they seek independent financial advice.

One couple, Mr and Mrs Waldron, were given until this week to decide which option to follow but the Pensions Advisory Service and Citizens Advice Bureau could not advise them and they could not find an adviser willing to offer guidance. The couple could not get legal advice on what to do and have decided to take out annuities to avoid the risk of losing their AVCs.

Altmann says: “Any adviser fined for misselling must surely have a case for redress against the FSA, since none of the insecurity of these AVCs was factored into the calculation of compensation or penalties on advisers.”


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