View more on these topics

L&G apologies to client over pensions tax free cash error

Legal and General Assurance Society has apologised to a client for making repeated mistakes in the information it gave about the amount of tax free cash he could take.

In a ruling from The Financial Ombudsman Service, Mr M complains L&G’s errors resulted in the need for him to return funds and caused him “significant trouble” and upset.

In the case, Mr M holds two buy-out pension plans with L&G and had been considering his retirement options with his financial adviser.

L&G provided Mr M with an illustration of his benefits in July 2016 which showed a fund value of £110,380.78 and the option of a tax-free cash sum of £35,921.34.

Mr M’s adviser alleges he contacted L&G to query the amount as it represented more than the standard 25 per cent tax free cash allowance.

The adviser was told there was an enhanced tax-free cash payable on Mr M’s policies.

In August 2016, L&G issued another valuation of the pension fund and this time the fund was valued at £117,070.24 and the tax-free cash was shown as £32,845.26.

On 9 December 2016, the same valuation was sent to Mr M and again the tax-free cash showed more than the standard 25 per cent allowance.

Mr M sought financial advice for his pension planning and based upon the enhanced tax-free cash he decided to retain his pension with L&G and move the fund into a drawdown option.

In September 2016 L&G wrote to Mr M and confirmed receiving all the paperwork to complete the transaction. L&G also said it could release the tax-free cash of £33,094.88, and would place the remaining funds of £83,770.25 into drawdown.

The amount of tax free cash paid was in excess of the standard 25 per cent allowance.

Mr M received a further undated letter from L&G in March 2017 that said it miscalculated his protected rights element when calculating the tax-free cash.

Mr M had subsequently received less than he should have done and was due a further payment of £5,064.70.

Mr M had no further correspondence until October 2017 when he received a letter from L&G explaining it had made an error and he was actually overpaid £8,327.88.

The letter explained the calculator used had the wrong formulas and this resulted in the incorrect calculation.

L&G apologised for the mistake but said Mr M would need to repay the £8,327.88 or it would be classed as an unauthorised payment, which would lead to a tax liability.

He complained to L&G who accepted it made a number of errors and apologised but explained the only way to avoid an unauthorised payment was to repay the £8,327.88.

L&G offered Mr M £250, later increased to £500, in recognition of the trouble and upset caused yet Mr M remained unhappy.

Mr M called for L&G to cover the cost of the tax liability and asked the FOS to investigate.

An adjudicator understood Mr M would have difficulty in repaying the £8,327.88 and issued her first view on that basis, however.

She explained in looking at redress she could not agree that L&G should pay the tax liability for Mr M as this would put him in an enhanced position.

She acknowledged Mr M suffered and invited L&G to reconsider the £500 offered as well as indicating the steps it should take regarding the unauthorised payment.

Mr M then found he was able to find a way of repaying the £8,327.88 and so the adjudicator issued a second view.

In repaying this amount, L&G’s error was corrected and there would no longer be an unauthorised payment.

She asked L&G to pay a further £250, making a total of £750 by way of redress for the trouble caused to Mr M who accepted but L&G disagreed and asked for a review.

Ombudsman Wendy Steele agreed with the adjudicator and says L&G should pay £750 for the upset caused.

In a statement to Money Marketing, L&G operations director Paul Lewis says: “We extend our apologies again to Mr M for the mistake made and the trouble and inconvenience caused. We identified that an error had been made and wanted to rectify this with the customer in their best interests. We accept the ombudsman’s decision and have increased the level of payment in respect of trouble and upset accordingly.”

Recommended

6

MPs slam plans for FOS review

MPs on the Treasury select committee have slammed the Financial Ombudsman Service’s plans for how it will review past cases for evidence of poor decisions. FOS is planning to review decisions made soon after it reorganised in 2016, and has provided details of its proposed methodology to committee chair Nicky Morgan. FOS has outlined a […]

18

FCA plans to hike FOS compensation limit by £200,000

The FCA has published a consultation on proposals to hike the maximum compensation amount the Financial Services Ombudsman can require firms to pay. Raising the maximum amount of compensation would see the cap increase from £150,000 to £350,000. Adviser and wealth manager trade body Pimfa has already criticised the proposals arguing they could lead to […]

3

Sesame and Openwork top latest FOS complaints table

Well-known names in the advice market like Sesame, Openwork and St James’s Place have once again topped the latest complaints data as the number of complaints against financial planners has ticked up. However, the proportion of upheld complaints against the most complained about advice firms fell in the first half of the year, according to […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com