The Financial Ombudsman Service (Fos) has rejected at least two complaints from advised clients about the management of Aegon’s Lifestyle and Retirement funds.
FTAdviser previously reported that clients of Aegon's Lifestyle product are automatically transferred into the Scottish Equitable Retirement fund, which invests 75 per cent in gilts and 25 per cent in cash, with a one per cent annual management charge.
But that fund has lost more than 40 per cent in the past three years, and 30 per cent over the past five years, as volatility has been acutely high in the gilt market.
This was first as a consequence of the “mini" Budget in 2022, and subsequently as a result of the Bank of England raising interest rates. The losses stem primarily from the fund being invested in long dated gilts.
Those assets are generally regarded as being more likely to perform well in a world where economic growth is slowing and rates are likely to fall.
Those are precisely the opposite conditions to those which prevailed in 2022, when investors feared inflation more than a slowdown in growth, and so short duration bonds performed better. All of the gilt exposure in the fund is long duration.
FTAdviser now understands there have been at least two complaints to the Fos against Aegon relating to this fund.
Neither of these people are the client referred to in FTAdviser’s original story.
One complainant, Mr H, told the Fos his pension pot had fallen by £250,000 since being transferred to the retirement fund.
Clients are automatically transferred to the fund one year from their stated retirement date, in anticipation of them buying an annuity at that point.
The Lifestyle fund factsheet states that clients are automatically transferred. Aegon also states it is not a financial adviser and is not obliged to monitor the suitability of an individual client.
According to the Fos complaint, the individual was not a pension expert and so they paid Aegon to manage the pension.
They stated that they complained to Aegon about the performance of the retirement fund, and said they did not wish to buy an annuity, but, the complainant said, Aegon did not act on this.
The complainant had wanted to put all of the pension pot into cash, but said that if he had changed to a different provider it would have impacted his Fos claim and he would have incurred charges.
In it’s response, Aegon stated: “Aegon said the poor performance of the retirement fund was due to the economic climate and was not its responsibility.
"It said Mr H had invested in an annuity targeted fund which used a lifestyle approach to move his investment over time to preserve the size of annuity that he would be able to buy at retirement.
"Once he reached his selected retirement date he would have moved into the retirement fund which invested 75 per cent in long gilts and 25 per cent in cash. Mr H reached his selected retirement date in early 2021 but he then asked to change it to early 2023 and decided to stay in the retirement fund.”
The Fos adjudicator stated in their decision that they did not feel Aegon had acted unfairly, because when the pension was set-up in 2013 and placed into the Lifestyle strategy, the terms and conditions of the strategy made clear it would be transferred into the retirement fund.
The adjudicator said: “Aegon were not giving financial advice about Mr H’s plan. They were unable to switch investments without his instructions. They had explained this and said he could move his investments to a number of alternative funds and invited him to get in touch with a financial adviser. Mr H confirmed he hadn't contacted a financial adviser.”
The adjudicator stated her view that Aegon’s role is “administrative in nature” and that they acted in line with the client’s instructions.
Aegon showed the Fos an email it had sent to Mr H, in response to his request to change his retirement date.
The email from Aegon stated: “If you choose not to match these dates, it could result in the mix of your investments not being the most appropriate at your selected retirement date.’
Case 2
The second complaint, also rejected by the Fos, relates to a client known as Mr P.
In his complaint, he stated that Aegon did not adequately communicate with him about the risks associated with the lifestyling strategy if gilt prices fell sharply.
The complainant stated that while Aegon published an article on its own website highlighting this, it was not actively or directly sent to clients of the Lifestyle strategy.
Aegon’s response to this was: “Aegon has said it doesn’t provide financial advice to Mr P and while it publishes information regarding the funds it offers on its website, it wouldn’t send this information directly to consumers as this could be seen as providing advice – something it isn’t able to do.
Aegon also said it encourages consumers to seek independent financial advice regarding their investments.
The client rejected this and stated they had requested Aegon to keep them updated with news regarding his retirement account.
The adjudicator rejected the complaint.
She was of the view that there was not a duty on Aegon to provide the website information to Mr P directly and it didn’t offer financial advice to him.
She agreed that had Aegon sent the article directly to him it could have been seen as providing advice, which it wasn’t allowed to do.
She went on to say that she regards the relationship between Mr P and Aegon as being “execution only”, with Aegon’s responsibility being to implement the requests of the client.
david.thorpe@ft.com
