Friends Life has denied featuring apparently contradictory annuity rate options on the same page of its policy document.
In its October edition, Money Management’s Secret IFA column says the rules within a policy document, dated 2011 but still being issued, appear to suggest that a deceased policyholder’s spouse or civil partner would receive the same annuity rate as the policyholder had in life, but then goes on to say they will receive a different sum based on current rates.
This would make it difficult for the surviving partner to plan for their income, especially if the deceased was the only half of the couple who had money saved for retirement.
The second paragraph of the document states, “If you choose to include a pension payable after your death for your husband, wife or civil partner, our current annuity rate will apply to this part and is not guaranteed.” This means that the spouse or partner would lose the right to guaranteed annuity rates after the death of the policyholder.
At the bottom of the same page for the policy, it says, “Level pension payable monthly starting one month after retirement, with same pension mount paid to your husband or wife after your death.” Under these terms, the spouse or partner would be guaranteed to receive the deceased’s pension payments after the policyholder’s death.
The policy could be problematic for anyone attempting to make a claim for a guaranteed annuity rate. It is unclear whether the survivor would receive the same pension payments as the deceased, or if the annuity would be based on current rates and not guaranteed.
A spokesperson from Aviva, the company that owns Friends Life, responded, “When a customer is entitled to a Guaranteed Annuity Rate (GAR), for some products they can also choose to pass their pension on to their spouse/partner when they die. The policyholder’s pension can be calculated using the guaranteed rate but, as the document explains, the pension payable to the partner after death is only eligible to be calculated on current annuity rates.
“The pension figure is calculated using a combined guaranteed and non-guaranteed rate - the policyholder’s part on guaranteed rates, and the spouse’s part on the standard annuity rates.
“These are complex issues but we always try to ensure that our communications to customers are as clear as possible,” they added.
