Friends Life told FTAdviser that it was “aware of a specific case” where it “failed” to send some information to an adviser at the same time that it was sent to the customer, saying that it had made a payment to the adviser “as a gesture of goodwill”.
A spokesperson for Friends Life said: “In this case, as a gesture of goodwill, we made a payment to the adviser to reflect commission that would have otherwise been paid. This was an error as our normal practice is to send information to the adviser at the same time as the customer.”
The IFA in the case, Michael Ward, principal of Ward House, told FTAdviser that in April 2011 Friends Provident sent a letter to a client informing them of an enhanced annuity option provided by Partnership.
The client was part of a Friends Provident Group Pension scheme that was serviced by Ward House. Mr Ward said that that Partnership did not offer his client terms as he did not need an enhanced annuity.
The client had a pension pot of £63,104.42 and through the annuity offered by Friends begun receiving a gross annual payment of £3,100 from June 2011.
Mr Ward said: “If he had exercised the OMO, he would have received an extra £575 per year. This is an 18 per cent difference. When I told Friends that, they said that it was their prerogative as they [clients of the group pension scheme] were their clients as well.”
Following involvement from both the adviser’s compliance provider Bankhall and his local MP Andrew Turner, Friends agreed to increase the client’s pension by the amount they had been disadvantaged.
A letter was also sent to Mr Ward confirming that Friends would be making a payment to his firm of £527, which reflected the amount of commission his firm would have received on purchase of the annuity.
A spokesperson for Friends Life claimed that Friends Life was running a pilot under which customers approaching retirement can be referred to Partnership for the option of taking out an enhanced annuity, if it is likely that they will be eligible for this type of annuity.
The spokesperson said: “Our pilot is designed to make customers aware of the clear benefits of enhanced annuities if they qualify, as this type of annuity could provide a significant increase to the pension they receive.”
Within the letter to the policyholder, in which a number of questions are asked to ensure they are eligible, the spokesperson claimed it also specifically recommends that the customer should consult a financial adviser and it give guidance on how they can contact an adviser if they do not have one.
The spokesperson said: “We also point out to the customer the availability of the open market option facility. In cases where we do write to the customer, we also send copies of the letters to their last-known adviser at the same time.
“Our aim is to ensure our customers have the best opportunity to optimise their retirement income through a product that is specifically designed for their needs.”
He pointed out that Friends is “not engaging” in direct advice and it is “not our intention” to compromise how IFAs work with their individual clients upon retirement.
He told FTAdviser: “We believe that the best outcome for customers is that they receive personalised financial advice and we fully support this.
“However, we believe it is also incumbent on the whole industry to raise awareness of and improve access to retirement options that may significantly increase a retiree’s pension.”
