The Financial Ombudsman Service has upheld a complaint against Howard Wright Ltd after it incorrectly set up an annuity.
The complainant, identified in the decision as Mrs L, alleged that the firm had incorrectly set up an annuity for her husband, Mr L.
Mrs L explained that she and Mr L received retirement planning advice from Howard Wright Ltd in 2018 when it recommended that Mr L transfer the benefits of an occupational pension scheme he held to a pension provider and purchase an annuity.
Documentation showed Mr L’s intention when considering the annuity was to ensure sufficient income for the rest of his and Mrs L’s life and, if Mr L should die during the guarantee period, the annuity payments would continue and be paid to Mrs L.
Based on Mr L's objective, Howard Wright Ltd recommended that the annuity should be set up with a joint life 100 per cent spouse’s pension and a 20-year guarantee period, which was accepted by the couple.
In February 2022 Mr L passed away and, when Mrs L contacted the firm, she was informed that, due to how the annuity had been set up, she wouldn’t receive the 100 per cent spouse’s pension until the conclusion of the 20-year guarantee period, in 2038.
Until then, annuity payments would continue but be paid to the person named as beneficiary, Mr L’s daughter, Mrs T.
The blame game
Howard Wright Ltd queried this with the pension provider but was informed that the policy had been set up as requested in the application completed by Mr L.
Mrs L then made complaints to both the pension provider and the firm saying the annuity had been set up incorrectly.
The provider did not uphold the complaint as it said it had no discretion over who the required payments were made to as it had to adhere to Mr L’s wishes as he had set out in the application form.
Howard Wright Ltd also did not uphold the complaint, stating that it considered the complaint should be against the provider.
Investigator's findings
Both complaints were then brought before the Fos and, while the view of the investigator was that the complaint against the provider should not be upheld, she judged it should be upheld against Howard Wright Ltd.
The investigator said that she thought the firm had obtained annuity quotes on a different basis to what Mr L had wanted, explaining that they should’ve been obtained on the basis of “overlap” but had been obtained without this.
She additionally identified that, although Mr L had signed the application form himself, it had likely been pre-populated by Howard Wright Ltd.
She also said that, although Mr L had received the quotes and annuity policy documents, it was reasonable for Mr L to think the quotes Howard Wright Ltd had obtained reflected the annuity that he had discussed with them and required.
"Howard Wright Ltd, as Mr L’s paid advisers, ought to have checked the vita details, such as who the annuity would be paid to, in both the initial application, and in the policy documents once they were received", she added.
The investigator concluded that it was reasonable for Mr L to have relied on Howard Wright Ltd ensuring what they had agreed was reflected in the document.
Ombudsman's decision
Following the investigator’s findings, the ombudsman stated that, in Howard Wright Ltd submitting the incorrectly completed annuity application form on Mr L’s behalf, it’s reasonable to conclude it didn’t provide the service it ought to have done.
As such, the ombudsman determined that Howard Wright Ltd was responsible for the annuity being set up in the way that it had been and, as a result, for Mrs L not receiving the guarantee-period annuity payments.
The ruling therefore stated that Howard Wright Ltd should put Mrs L as far as possible into the position she would be now in if it hadn’t been for its error.
The Fos recommended that, if the total cost of the future annuity, plus the past loss calculation (not including interest added) exceeds £170,000, Howard Wright Ltd should purchase the annuity to the full value required to provide Mrs L the monthly annuity income of £1,389.48.
If Mrs L accepts the determination, the total cost of the past loss and future annuity, up to a total of £170,000 (not including interest) is binding on Howard Wright Ltd.
However, the decision warned that it’s unlikely that Mrs L can accept the determination and go to court to ask for the balance of the compensation owing to her after the past loss calculation has been paid.
The ombudsman therefore added that Mrs L may want to consider getting independent legal advice before deciding whether or not to accept this decision.
Howard Wright Ltd is a financial planning company currently based in Wolverhampton.
tom.dunstan@ft.com
