Putting the blame squarely on faulty systems, provider Aegon accepted out-of-date advice was mailed to annuity clients that stated they must annuitise by the age 75. The firm’s service was termed ‘sloppy’ after the goof-up and may result in legal claims.
Clients received correspondence from Aegon on vesting options which advised that while they could defer their benefits until a later date, “HM Revenue & Customs’ rules state that this cannot be later than age 75.”
The correspondence said: “If your fund is currently in unsecured pension, and is made up of non- protected rights, you have the option to take out an Alternatively Secured Pension (ASP) from the age of 75. It’s an HM Revenue & Customs’ condition that you purchase an annuity no later than your 75th birthday.”
Advisers were surprised to see the correspondence since the requirement to buy an annuity by 75 years was abolished in April.
“It is sloppy from Aegon but it is something that as an industry seems to becoming more and more frequent. If this is going out to clients who no longer have advisers and which is also something which is likely to be the case as Retail Distribution Review bites then it is quite worrying,” said John Hutton-Attenborough, adviser at Ashcourt Rowan.
If Aegon policyholders bought an annuity product on the basis of the letter, they were likely to have a legal claim, said Robert Morfee, partner at law firm Clarke Willmott.
“If Aegon have been sending out letters giving people advice to buy an annuity before age 75 then they have undertaken an unnecessary financial transaction. What Aegon is doing is advice although it is not regulated advice as such. It seems to be very simple law. Working out what is the loss of having an annuity that you do not need is more complicated, you would need an actuary to work it out,” he added.
“We have identified a systems issue that resulted in our annuity vesting communications stating customers had to take their benefits at age 75,” said Mark Locke, spokesperson for Aegon.
“We are looking into this systems issue as a matter of urgency and this will be fixed as soon as possible. We apologise for any confusion or inconvenience this issue has caused,” he said.