A retiree who claimed Royal London had incorrectly interpreted the terms of its annuity policy has lost an appeal at The Pensions Ombudsman.
The man, referred to as Mr S, argued that the policy clearly states that, from age 60, it would pay an annuity per year of £2,127, “exclusive of profits”.
He took this wording to mean that profits would be added to, and therefore increase, the basic annuity.
Mr S has also complained that information supplied to him has not been clear and Royal London has failed to properly explain the rationale for how it proposes to pay his benefits.
In his claim, Mr S argued that the provider has not produced evidence to support its position on how it administers the policy. He considers it has focused incorrectly on explaining how it calculated the guaranteed minimum pension instead of dealing with the real issue of how the benefits are paid.
Royal London agreed that the policy schedule is perhaps poorly worded in saying the amount of the annuity is described as “with profits”. However, it argued that does not mean the policy operates in the way interpreted by Mr S.
In recognition of some administrative failings, for example not explaining some points about the policy clearly, the provider offered Mr S a goodwill payment of £150 in February 2016.
The claimant declined the compensation, because he believed that it was conditional on him not taking his complaint further.
Karen Johnston, deputy pensions ombudsman, disagreed with Mr S’ interpretation of the wording.
She said: “Based on all the available information, the only reasonable interpretation of how the Policy operates is that it provides a pot of money at retirement that can be used to provide retirement benefits either through Royal London’s annuity bureau or on the open market.
“This pot of money is made up of the notional value of the fund including bonuses declared during its term, plus any terminal bonus that might be payable. There is a guarantee within the policy in that it will always provide a minimum pension of a fixed amount but that is the extent of the guarantee.
“Mr S’ complaint in relation to Royal London’s interpretation of the policy is therefore not upheld.”
However, Ms Johnston argued that leaflet that Mr S has supplied and says was issued to him at outset of the policy – effected in 1983 - is not clear.
She said: “It does not properly explain that there is no relationship between the interest-related fund he is accruing and the guaranteed annuity.”
Ms Johnston also said that during the term of his policy, Mr S “was given a variety of different styles of statements”.
She said: “Although a lot of the underlying information was consistent, the addition, and removal, of some pieces of information make it much more difficult than it should be to ascertain the correct position.
“Royal London has acknowledged it could have been clearer in some of its correspondence with Mr S, and has offered compensation for that.”
Mr S was due to take his benefits in February 2016, but it wasn’t until May in the same year that he received what appears to be a definite explanation of how the policy operates, the deputy pension ombudsman said.
Despite considering that the provider could have supplied the claimant with better explanations, Ms Johnston doesn’t find Royal London responsible for Mr S not being able to access his retirement benefits.
She said: “Royal London was correct in its interpretation of the policy and presented the correct options to Mr S. It also told him that he could take his benefits and top up later if necessary, but he chose not to take them.
“Therefore I do not consider he can demonstrate that he has been kept out of his money in the manner which he asserts.
“In the circumstances I do not find maladministration which has caused Mr S has any significant injustice. I consider the offer made by Royal London to be adequate and do not uphold the complaint.”
maria.espadinha@ft.com
