Annuity  

Adviser held to account after annuity advice failure

Adviser held to account after annuity advice failure

An advice firm has been forced to pay out after it neglected to give its client all the relevant information when purchasing an annuity.

Romilly Associates IFA has been ordered by the Financial Ombudsman Service to pay compensation after it gave unsuitable advice about an annuity which resulted in the clients' beneficiary missing out on more than £24,000 in payments.

The beneficiary, who the Fos called Mrs G, complained about the advice firm after her late husband was advised to buy an annuity with a five-year guarantee period but, she argued, he should have taken a ten-year guarantee.

Mr G took advice from Romilly in 2012. He was approaching age 60 and held a pension plan with a fund value of £68,000.

Mr G told the adviser he wanted to maximise his income by not taking the tax-free cash available.

Therefore the adviser recommended Mr G take a five-year guaranteed annuity to provide some protection until he would take his state pension and also have further income options as he held another pension plan.

Mr G’s annual income from the annuity was £4,891.08 from June 2012. The income was based on a single life plan and payable monthly in advance for a minimum of five years.

The adviser also recommended he take an enhanced annuity due to Mr G’s ill-health. 

Mr G passed away in 2015 and income payments were paid until the end of the five-year guarantee period in 2017 but then stopped.

Mrs G complained to Romilly saying it had failed to give her late husband information about a ten-year guarantee period, which could have been better suited to his circumstances.

Romilly rejected the complaint saying the five-year product matched Mr G’s objectives to maximise income and all other options had been discussed.

An adjudicator at the Fos found although the firm said it had discussed the ten-year guarantee option, there was no evidence to show that they quantified the income for this option. 

He said in order to assess all the suitable options, the adviser should have explored all options available so Mr G could have made a fully informed decision.

The adjudicator accepted that the inclusion of the spouse’s pension within the annuity would have significantly reduced the annuity income and was satisfied that Romilly was not wrong to discount this option. 

But the adjudicator felt without knowing the actual amount of income for the ten-year guarantee option, Mr G wasn’t in a position to make a fully informed decision. 

The annuity provider told the Fos a ten-year guaranteed annuity in 2012 would have cost £4,825.57, which was £5.46 per month lower than the five-year guarantee.

The adjudicator said Romilly should have recommended the ten-year option as the difference in income was not significant but payment would have been received over a longer period.

But Romilly disagreed saying Mrs G wasn’t its client and that its advice to Mr G hadn't been unsuitable.