Adviser under fire for annuity sale to terminally ill client

Adviser under fire for annuity sale to terminally ill client

The Financial Ombudsman Service (Fos) has ruled that an adviser should have taken his client’s terminally declining health into consideration before recommending an annuity.

Chadney Bulgin has been ordered to compensate the widow of a client the intermediary claimed was also a friend.

The intermediary secured the husband – known as Mr G – an annuity just three months before he died. Fos ruled that Chadney Bulgin should have not recommended this product and instead highlighted the benefits of using his other accessible funds.

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Mr G was retired and receiving pension income of about £16,000 a year and also had a pension fund of about £350,000 from which he had taken tax-free cash, but no income.

He owned his own home with no mortgage and had cash savings of about £180,000.

He also owned some other assets that were valued at about £200,000.

Chadney Bulgin’s fact-find noted that his attitude to life had changed over recent years after being diagnosed with an illness, and his objective was to be financially secure in retirement.

It also noted that Mr G wanted to be able to draw income in addition to the pension income of £16,000 a year and spend more on holidays, and that Mr and Mrs G had separate finances.

As a result, in April 2012, Chadney Bulgin recommended flexible drawdown and to increase his pension income by £4,000 to bring his annual income to £20,000. He would then be able to draw as much as he wanted from his pension fund.

An annuity was recommended to provide income of £4,000 a year. This included a spouse’s benefit for two thirds of the initial income.

The cost of that annuity was about £76,000. After the application had been made, there were a number of delays and Mr G decided to instead buy an annuity on a single life basis for about £40,000.

It took some time for the annuity to be arranged, but it eventually started in about October 2013. Mr G then died in January 2014.

Mrs G then experienced some problems with the payment of the pension after her husband’s death and took advice from a new adviser who has assisted her with the complaint.

Reviewing the case, Roy Milne, ombudsman, said the adviser should have taken Mr G’s declining health into account before giving advice.

Chadney Bulgin must put Mr G’s Sipp, which was transferred to Mrs G on his death, back in the position it would be in now if Mr G had received suitable advice.

The ombudsman also made an award for the £1,000 plus VAT to pay for Mrs G’s new adviser.