An adviser and his client have referred a case to the Financial Ombudsman Service over claims that ReAssure miscalculated the client's tax free cash and lacked in communication.
Roger Bowsher, IFA at Independent Wealth Management, alleged that ReAssure did not pay his client Alan Hale the amount of tax free cash that he was entitled to under the Section 32 pension policy.
A Section 32 policy is bought from an insurance company using funds from a registered pension scheme.
The policy number was held previously with Old Mutual Wealth but this part of the business was later sold to ReAssure.
Phoenix Group then acquired ReAssure back in 2020.
According to Bowsher, the Section 32 policy protected a tax free cash amount of 80.97 per cent, which was originally from a Zurich Executive Pension Plan.
He said ReAssure paid out tax free cash of £46,150.63 instead of £58,336.96.
However, ReAssure told FTAdviser that the scheme specific tax free cash retains the monetary value of the lump sum rights, not the percentage of the total pension rights they represented as at April 5, 2006.
As at April 5, 2006 the value of Hale’s pension rights in his former EPP scheme was £35,572.46, and he was entitled to £28,805.76 as tax free cash.
This represented 80.97 per cent of the total pension rights in the scheme and exceeded the standard 25 per cent introduced from April 6, 2006, and so the £28,805.76 would be retained under scheme specific tax-free cash, often referred to as transitional tax-free cash.
To work out the current maximum of tax free cash, you are first required to take the maximum tax-free rights as at April 5, 2006 and increase this value in line with the change in the underpinned lifetime allowance.
The adviser said ReAssure first said it could not transfer the policy to flexi-access drawdown, then it said they could only transfer to its own flexi-access drawdown. Later the firm said it did not offer flexi-access drawdown.
“There are clear and obvious cultural problems at Phoenix Group and especially ReAssure,” Bowsher said.
“These are not likely to be fixed without clear leadership starting at board level. There also needs to be an investment in staff training and staff monitoring ensuring that the information given is accurate and correct.
“To give mis-information on a consistent basis, client after client, highlights gross incompetence at leadership level.
“Those actions have led to serious distress for both Mr Hale and myself, not to mention the other ongoing complaints I have with ReAssure that are still outstanding.”
The amount of tax free cash was to be paid to Hale, with the residual balance transferred to Hale's existing Quilter Personal Pension Plan.
Reassure said the amount it transferred to Quilter in December was correct.
However, due to a lack of communication, Bowsher said he was unable to check the tax free cash amount and therefore authorised Quilter to return the funds to ReAssure pending this matter being sorted out.
In a letter sent this week (August 8) by ReAssure, it outlined to Bowsher how the calculations for the tax free cash amount were made.
"Had ReAssure have sent me this letter 12 months a go, then I could have checked it all out for Mr Hale," the adviser said.
The firm explained there were some delays to the processing at the start due to the fact that this is an older, more complex product, and claimed it has worked to enable a solution which wasn’t automatically available for this style of product.
This enabled Hale to take the maximum level of tax free cash available and drawdown the residual amount.
The letter, seen by FTAdviser, states in order to progress the payment as part of the next steps, ReAssure needs confirmation from the adviser or the Hale that they are happy to send the remaining funds to Quilter as it did previously.
This transaction will be a drawdown to drawdown transfer as it was in December.
ReAssure wrote: "In order to set this matter right for Mr Hale we will pay the returned funds plus an 8 per cent interest rate added to be calculated upon receiving the transfer request from Quilter."
A Phoenix spokesperson said: “While we transferred the correct amount to Quilter in December, we recognise we have subsequently not delivered our usual standards of service.
“We would like to apologise to Mr Hale for the delays and inconvenience caused, and will be working with Fos to agree an appropriate level of compensation.”
FTAdviser understands that Bowsher also had conversations with Anthony Scammell, UK director of operations at Quilter, who helped with the issues they were facing and ensured payments were made as requested by the adviser while they sought a resolution.
sonia.rach@ft.com
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