The mis-selling of pension annuities could affect thousands of people who may still be unaware that the financial security of their retirement years is at risk.
In February this year, the Financial Conduct Authority (FCA) published a report, which suggested that up to 80 per cent of retirees were losing out on potentially £1,500 per year as a result of poor advice or because they were simply sold the wrong product.
One of the most common examples involves customers suffering a serious illness/health condition who were sold a standard annuity instead of an enhanced product. This requires a financial arrangement to be put into place, which allows access to larger sums of money within a shorter time frame. In these circumstances a standard product is neither designed nor able to meet the specific financial needs of the customer, which can leave themselves and their family in an uncertain and vulnerable position.
Following the spring Budget when measures were announced to increase flexibility of pensions at retirement from 2015, deepening concern over the worth of their pensions has been expressed by those who are about to cash in their pension for an annuity.
Further revelations surrounding the way in which ‘people in closed accounts are being treated’ is due later this year, following a review of pension and investment policies sold in the 1980s and 1990s, currently being undertaken by the FCA. Since that time, millions of savers have encountered obstacles, which are felt to be aimed at preventing movement of their money. The imposition of excessive penalty charges are typically between 10-12 per cent – but have been as high as 20 per cent in some cases.
The issues under scrutiny by the FCA will no doubt continue to be highlighted by the press in the months leading up to the FCA report, further ratcheting up the anxieties of savers re-evaluating the worth of the traditional pensions ‘nest-egg’ purchased for their retirement years. Many were incorrectly advised to take out personal plans when their financial security would have been better guaranteed within a company scheme. In addition, pensions were subsequently and inappropriately transferred from 'occupational- defined' benefits to 'self-invested' defined contribution pensions.
While the impact of the review remains to be seen there are still some instances where an annuity is so obviously unfit for purpose that grounds for a legal claim exist, regardless. And so we return to the issue of pre-existing medical conditions..
The wrong type of annuity?
A specific medical condition can trigger early retirement or have a subsequent impact upon life expectancy, which brings particular financial requirements. It is particularly crucial for policy holders to revisit their policy paperwork and check the small print.
The list of medical conditions and pre-existing illnesses, with implications for annuity suitability is broad but does include, cancer, heart and liver conditions, diabetes, rheumatoid arthritis and Parkinson’s disease.
The key point to be aware of is:
If you suffered from a particular condition at the time of purchasing the annuity and was sold a standard product, which did not take your specific needs into account, your annual entitlement may be insufficient.
If you have any suspicions you may have been mis-sold an annuity...
What you need to do right now:
Think back. Do you remember having a conversation with the adviser regarding your medical condition or illness? Were you asked a set of questions to help determine the specific type of annuity you might need?
Check the small print. What does your policy say? Does it sound like a standard product or are there specific elements relating to the need for an enhanced package? Does it set out exclusions involving illness or medical conditions?
Seek expert professional negligence advice. Mis-selling of pension annuities is an exceedingly complex area. Understanding whether or not you have the grounds to take a claim forward is difficult without talking to a mis-selling expert who will help you to investigate and, potentially, redress the issue.
Making up the shortfall
If it is discovered that you do have a rightful claim for redress you should expect to recoup the financial loss suffered as a result of having the wrong annuity in place. This will, of course, vary from case to case, depending upon the type of annuity that was purchased.
Essentially, your professional negligence solicitor should seek to recover the difference between the amount you received from your annuity and the amount you should have received if the correct product had been sold to you in the first place.