The life and pensions arm of Aviva has been ordered to compensate a customer after his pension contributions were cut-off without warning.
The Financial Ombudsman Service upheld a complaint from a pension holder, known as Mr D, against the provider after it cancelled his monthly direct debit contributions in December 2012 without notifying him.
Aviva claimed it had been instructed by Mr D’s bank to cancel the transactions in November 2012, although the company acknowledged it had failed to inform him of the change.
According to Mr D, it took him until February last year to realise the contributions had stopped, which meant he missed out on 27 monthly contributions and lost out on tax relief and investment growth as a result.
After complaining to Aviva in June 2015, the insurer said it was reasonable for Mr D to have become aware contributions had ceased when he received his statement in January 2013.
It therefore agreed to offer him compensation by calculating the loss from three months missed premiums between December 2012 and February 2013.
It may not have been immediately apparent that a payment had been missed. Benjamin TaylorAviva also agreed to apply the tax benefit and calculate the investment growth which those three contributions would have received had they been made at the time.
However, Mr D didn’t think the offer from Aviva was reasonable and therefore lodged a complaint with the Fos.
Ombudsman Benjamin Taylor sided with Mr D, although he said it was not fair to hold Aviva responsible for all of the contributions he had missed.
He said the saver should have become aware the direct debit had been cut off by July 2013, when he received a bi-annual statement which made it clear no contributions had been made to his plan.
Mr Taylor said: “Prior to July 2013, it may not have been immediately apparent that a payment had been missed.
“In the following six months [after the pension contributions were cut off] it is not unreasonable that Mr D may not have picked the error up,” he stated, adding contributions were paid from a joint account which the pension holder didn’t use on daily basis.
The Fos therefore told Aviva to figure out the loss for pension contributions over eight months between December 2012 and July 2013, depending on what the saver could afford to contribute.
As well as ordering Aviva to pay £200 for the “trouble and upset” caused by its error, Mr Taylor said the company should ensure it outlines its calculations to Mr D in a clear and understandable way.
katherine.denham@ft.com
