TPO upholds complaint against Aviva

The Pensions Ombudsman (TPO) has upheld a misinformation complaint against the Aviva Staff Pension Scheme.

‘Mr T’ complained that the trustee had refused to commute all, or part, of his pension for a tax free cash lump sum (TFCLS) at age 60, the scheme’s normal retirement age (NRA), and had also failed to respond to emails or provide relevant information.

TPO upheld the complaint, stating that there was "sufficient information available" to the trustees to pay the TFCLS, without prejudicing the ability to meet the cost of the guaranteed minimum pension (GMP) at state pension age.

The scheme was ordered to confirm the correct benefits Mr T was entitled to receive at his NRA, including the maximum TFCLS entitlement, as well covering the costs for Mr T to seek advise on the basis of this information, up to £7,800.

Should Mr T receive advice that he should have transferred despite this, TPO ruled no further action was needed from the trustees.

However, should the advice state that Mr T should have stayed within the scheme, within 28 days of said advice, the trustees have been ordered to arrange for the remaining funds in Mr T’s Sipp to be transferred back into the scheme and used to reinstate the benefits to which he ought to have been entitled, with the correct pre-GMP pension to be put into payment immediately.

Finally, the trustees have been ordered to pay Mr T £1,000 for the severe distress and inconvenience, though the ombudsman noted that as Mr T had already been paid £500 from the trustees, this could be deducted from the award.

Mr T was a member of the Norwich Union Pension Scheme, which merged into the Aviva Staff Pension Scheme in 2002, and had a normal retirement age (NRA) of 60.

He had also received member communications when initially joining the scheme that outlined various tax-free cash sum options.

In 2017, Mr T stated that he intended to retire at his NRA, expecting to take a TFCLS with any residual amount providing a pension.

However, when Mr T received an illustration of the benefits payable as at 31 March 2018, the day after his NRA, it stated that there would be no TFCLS.

Two weeks later, Mr T queried why this option had not been included, also requesting a transfer value, receiving only a transfer value and pack in response though.

Mr T emailed Aviva on three separate occasions in December of 2017, complaining that he had been denied the opportunity to take a TFCLS option, and had received “a generally poor level of service”.

Aviva however, highlighted that there were circumstances where the scheme rules prohibited members from converting their pension into a TFCLS, citing past scheme rules.

It stated that: "According to Rule 12(i), on retirement, members could only commute part of their pension for a TFCLS if the remaining pension was sufficient to cover the revalued GMP at age 65”.

The scheme provided Mr T with alternative options, and subsequently received consent from Mr T to transfer his pension on 21 December 2017.

Whilst Mr T issued a formal complaint under the schemes internal dispute resolution procedure (IDRP) in June 2018, the scheme stood by its original reasoning that members could only take a TFCLS if the remaining pension would cover the revalued GMP, though it did offer £500 for distress and inconvenience.

Mr T made three further complaints in July and August 2018, with the final complaint on 20 August 2018 receiving no response.

In his complaint to the ombudsman, Mr T referenced previous TPO rulings that determined that “the GMP and the so called ‘anti-franking’ requirements only apply to SPA”.

Mr T also stated that trustees had provided him with incorrect, or misleading information, blocked his access to scheme rules, and had caused “a detrimental impact on his mental health”.

The ombudsman stated that whilst he understood the reasoning for the trustees’ stance in this case, he did not agree that it was in accordance with scheme rules, or that there were any external requirements causing the scheme to operate in this way.

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