The Pensions Ombudsman has ordered Aegon to pay one of its personal pension plan members £1,425 in compensation as a result of administrative failures that delayed a transfer out.
John Underwood, a member of the Aegon Personal Pension Plan, complained to the ombudsman that due to administrative failures he was unable to actively manage investments in his pension plan for over six months, and he sought compensation for a proportion of the investment losses over the period his account information was unavailable.
The matter arose when Mr Underwood, with over £300,000 invested, decided to transfer at the end of 2010 some of his fund to a self invested personal pension and keep the remainder in the scheme.
He instructed Aegon to transfer £195,000 to Capita, which they did on 14 December 2010. However, he subsequently changed his mind and decided to invest with LV, with Aegon receiving the reversed transfer from Capita on 4 February 2011 and subsequently transferring £193,571 to LV on 18 February 2011.
However, statements showed a total fund value of around £330,000 as Aegon stated that after the reversed transfer they became aware of issues with Mr Underwood’s plan and started to take corrective action.
“We discovered some fund adjusters hadn’t applied to his plan. We also became aware of some incorrect pricings as a result of our Transformation Program. The net result of this was we had to strip back Mr Underwood’s plan and rebuild it again.”
Mr Underwood sent a switching instruction to Aegon on 2 March 2011 to move 10 per cent of the cash fund investment split between two equity funds. Aegon responded to explain that there were errors on his plan, that it would be offline for two weeks whilst these errors were rectified and that they would backdate his switch instruction once this work had been completed.
It transpired that the switching instruction had not been actioned until 12 August 2011 and Aegon had persistently overstated the value of Mr Underwood’s investments by as much as £200,000.
His account had been offline for six months, denying him the opportunity to manage money effectively, given that he would usually monitor the plan and make regular switches.
Mr Underwood then referred the matter to the Pensions Advisory Service, which suggested he should be compensated by 50 per cent of the fall in investments during the relevant period, as he had not been able to mitigate it by switching funds.
However, Aegon said that Mr Underwood had benefited by £1,724 as they had not deducted a penalty from the second transfer.
Pensions ombudsman Tony King stated that in relation to the loss of opportunity to manage his funds of about £125,000 Mr Underwood should receive £625 which, calculated as a small percentage of £125,000, is a nominal and proportionate sum to acknowledge he might have been able to obtain a better investment return had he been able to make fund switches.
Mr King said: “The annoyance and distress of the matter will have been significant. I consider that an appropriate sum to compensate him for it would be £800.”
Therefore, within 28 days of the determination dated 18 September, Aegon are to pay Mr Underwood £1,425.
Aegon accepted it was “responsible for the problems with Mr Underwood’s plan in 2011”. However, they pointed out that he was not prevented from dealing in the period from early March 2011 and September 2011 as it was open to him to request manual valuations and provide switch instructions by phone or fax.
The firm argued that compensation previously offered to Mr Underwood was adequate in the circumstances.
In his determination, Mr Kind added: “It is not surprising that Mr Underwood decided to switch. However, I do not think that it is correct that he should not have to pay the penalty for doing so.
“I consider that Mr Underwood will have suffered protracted distress and annoyance as a result of the catalogue of failures listed above, but that the right way to compensate him for that is by a payment consistent with general awards for distress, rather than waiver of the transfer penalties.”
