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ScotEq pension error sparks unprecedented move by NU

A £172,000 bungle by Scottish Equitable could lead to the premature unwinding of a pensioner&#39s annuity with another life office.

In what is thought to be an unprecedented move, Norwich Union has agreed to surrender an annuity bought by Sussex pensioner Gordon Derby six years ago despite clear terms in the original contract forbidding the release of funds once invested.

Derby bought the annuity after ScotEq paid him £172,451 too much pension in 1995. Realising its error 16 months later, ScotEq demanded repayment of the funds. Earlier this month, Derby lost an appeal against a High Court decision 18 months ago ruling in ScotEq&#39s favour.

At the appeal, Lord Justice Simon Brown described ScotEq as a “rich and incompetent insurance company” but conceded Derby had been “unjustly enriched” and would have to repay £162,790 of the pension plus almost £36,000 in interest.

Derby&#39s only means of repaying ScotEq, which he refuses to do, is by unwinding his NU annuity although it will still leave a shortfall of £60,000.

An NU spokesman says: “This was an exceptional case. We were not under any obligation to unwind the annuity. We take each case on its merit and this should not be considered a precedent.”

A ScotEq statement says: “We made a generous offer to settle even after being successful in the initial action and we intend to try to get co-operation before taking any steps to enforce the judgement.”

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