Prudential must compensate a customer it forget to send a retirement pack to, resulting in four years of missed annuity payments.
The customer held a Prudential deferred annuity relating to his previous employer’s pension scheme. Pru was meant to send him a retirement pack three months before his retirement date in 2011.
However, when the pack had still not been sent in 2015, the customer contacted the insurer. He was told his payments would be backdated to his retirement date with the backdated sum totalling around £5,100 and subject to PAYE.
The customer complained that Pru should pay interest on the backdated payments as well as expressing concern about them being subject to tax.
Pru agreed it should have told the customer he could take his pension in 2011 but would not waive the tax or add interest. It sent the customer a £100 cheque for inconvenience.
After a second complaint, the insurer offered him an increased payment which the customer did not accept and subsequently transferred his income drawdown plan to another provider.
Ombudsman Alison Cribbs ordered Pru to compensate the customer and calculate the tax-free cash and net income benefits from the 2011 retirement date.
Cribbs says in the final decision notice: “I’m persuaded that Mr K transferred his benefits because he had lost faith in Prudential. And he was concerned about the tax that would be charged on the backdated lump sum.”
She adds: “Prudential says it would have told Mr K that he could arrange for the tax to be spread over the period that the payment represented. But this is not evident from the documents I’ve seen. Instead, Prudential simply directed Mr K to raise the issue with the HMRC.”
“Prudential also says that Mr K could have contacted it in 2011 if he had wanted his benefits paid. But Mr K says, and I accept, that he had forgotten about the pension until he came across some paperwork for it in 2015. So this does not affect my decision.”