Philip Wise, chartered financial planner at Informed Choice, filed a complaint with Aviva after his client was unable to access death benefits as drawdown despite the provider's key features document for stakeholder pensions stating this was a viable option.
The adviser said the issue threatened to leave the client £100,000 short because it meant they were facing an inheritance tax liability of 40 per cent.
The problem started after the client's husband passed away leaving behind a pension worth £250,000 with Aviva.
The client wanted to access the pension funds via drawdown for inheritance tax purposes. As her husband died before he turned 75, as his beneficiary she is able to access his pension pot tax-free. Any growth on the pension in drawdown is also tax-free.
However, if she takes the pension as a lump sum it becomes part of her estate which is then liable to inheritance tax.
Mr Wise said Aviva’s online pre-2008 stakeholder key features document stated: "If you die while you still have this pension plan [...] your nominated beneficiary [...] can choose to take the value of this fund as a lump sum, a dependant's or nominee’s flexi-access drawdown or a dependant's or nominee’s annuity."
An Aviva representative admitted to Mr Wise, in an email seen by FTAdviser, that the document was misleading and upheld Mr Wise’s complaint although Aviva would only allow the client to withdraw the funds as a lump sum death benefit, saying that the terms and conditions of the plan did not allow benefits to be accessed via drawdown in life or in death.
The email said: "Ultimately, I have upheld your complaint as we’ve not provided a correct description of pre-2008 stakeholder benefits in the online key features document.
"I’ve therefore fed back for this to be changed as soon as possible. I am very sorry for any inconvenience this has caused."
But Aviva then backtracked on its decision to uphold the complaint saying the adviser had referred to the incorrect key features document.
The document the adviser had referred to was titled ‘Key features of the stakeholder pension’ whereas the document Aviva said was correct for his client’s plan was ‘Key features of the personal and group personal pensions’.
The latter did not have a provision for a dependants' flexi-access pension.
Aviva admitted there was a misunderstanding on its part when it upheld Mr Wise's complaint.
An Aviva spokesperson said: "We are sorry for the misunderstanding in communicating the correct key features document to the adviser.
"We ought to have clarified the correct policy with him and signposted him to the correct literature."
However, Mr Wise argued that naming the document ‘personal and group personal pensions’ despite covering a stakeholder pension was misleading and created confusion.
He also said Aviva backtracking on its upheld verdict had caused more stress to the client and further dragged out the complaints process.
He said: "It is wrong that [Aviva] has several different key features documents for its stakeholder pensions, yet only makes one available on its website, without making reference to the fact that there are other key features documents for its other stakeholder pensions and that the terms differ from one stakeholder pension to another."
In its original upheld complaint response, Aviva did not offer the client any compensation but instead told Mr Wise to refer his complaint to the Financial Ombudsman Service within six months.
Mr Wise said: "Aviva has caused distress for our client and its lack of clarity has resulted in a widow having an IHT liability of £100,000 more than it might otherwise have been.
"Aviva’s arrogance has been illustrated by the fact that it has agreed that its literature is misleading, upholding a complaint, but it has offered no redress to our client."
He told FTAdviser that it is likely that the client will refer her complaint to the Fos.
amy.austin@ft.com
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