Prudential Personal Policy · CAS-42886-Y8K9

CAS-42886-Y8K9

Ombudsman’s Determination Applicant Mr N

Scheme Prudential Personal Policy (the Policy)

Respondent Prudential

Outcome

Complaint summary

Background information, including submissions from the parties The sequence of events is not in dispute, so I have only set out the key points. I acknowledge there were other exchanges of information between all the parties.

Mr N previously held deferred pension benefits in another pension scheme that he wanted to transfer to Prudential. He employed the services of an independent financial adviser (IFA) to assist him.

In August 1991, the IFA obtained a retirement projection from Prudential based on transferring in a value of £3,194.10 (the Retirement Projection). Prudential provided two possible benefit projections for when Mr N reached age 65, in 2025, based on two different annual investment growths. It projected:-

• A total fund value of £42,500. This would provide a lump sum of £10,600 and an annual pension of £3,670, based on an annual investment growth of 8.5%.

• A total fund value of £169,000. This would provide a lump sum of £42,200 and an annual pension of £16,400, based on an annual investment growth of 13%.

The notes said:-

1 CAS-42886-Y8K9 • “These two amounts do not represent the upper and lower limits of the possible amount of the benefit. What is actually paid will depend, for the with profits fund, on the bonuses added to the policy and, for the linked funds, the future movement in unit prices for the relevant funds (which can go down as well as up) and the effect of the charging structure.”

• “Pension benefits will also depend on the terms ruling at the date of retirement for converting into annuity”.

In December 1991, based on the advice of the IFA, Mr N established the Policy, transferring in an amount of £3,265.96 to be invested solely in the With-Profits fund. The notes on the application form said to read the Policy document for more information.

The Policy document confirmed that a recurring Policy Charge would be payable:-

• “A recurring management charge shall be made in respect of each investment- linked fund.”

• “A single Policy Charge shall be due in respect of all FlexiPension and IndePension policies on the life of the Investor and such other policies on the life of the Investors as are specified in the Society’s Policy Charge conditions.”

• “The Policy Charge shall be due yearly.”

In October 1997, following a request from the IFA, Prudential sent an updated fund valuation. The total fund value was £5,172.58. Prudential said that, in addition, a terminal bonus may be payable. Prudential also provided the IFA with details of the most recent Policy Charge.

In July 1998, following a request from the IFA, Prudential sent an updated fund valuation. The total fund value was £5,802.75. Prudential also included details of the annual Policy Charges between 1991 and 1997.

In 2003, upon receipt of a cash equivalent transfer value (CETV) illustration, Mr N queried the investment return. In response, Prudential said that:-

• Between 2000 and 2002, there had been considerable drops in the Financial Times Stock Exchange 100 (FTSE 100) which affected fund performance.

• Mr N’s With-Profits fund could attract a terminal bonus on death, transfer or maturity. As it was not a guaranteed bonus, a lower investment performance had reduced the terminal bonus amount. This led to a reduced CETV illustration.

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Prudential’s position

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Adjudicator’s Opinion

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Mr N did not accept the Adjudicator’s Opinion and the complaint was passed to me to consider. Mr N provided his further comments which do not change the outcome. I agree with the Adjudicator’s Opinion and note the additional points raised by Mr N. Mr N remained dissatisfied on two points. He said that:-

• No consideration had been given to the guaranteed minimum pension (GMP) element of his pension that he transferred into Prudential in December 1991. Mr N cited the recent High Court judgment regarding GMP Equalisation; Lloyds Bank Group Trustees and Lloyds Bank PLC [2020] EWHc 3135 (Ch). So, based on this judgment, Prudential must equalise his previously accrued GMP benefits.

• Prudential is in breach of contract if it does not offer him an annuity option. Mr N quoted section G.1.4 of the Policy document (see the Appendix) and said the terms in this are binding.

Ombudsman’s decision

I do not uphold Mr N’s complaint.

Anthony Arter Pensions Ombudsman

20 October 2021

5 CAS-42886-Y8K9 Appendix G.1.4 Application of Policy Proceeds

“The Society, in its capacity as scheme administrator, shall deal with the Policy in accordance with the provisions of the Rules and shall apply the proceeds of the Policy to provide such lump sums or purchase such annuities, for the Investor or his widow or dependants, as the Rules require. In the event of any inconsistencies between the Rules of the Scheme and any other provisions, the Rules are over- riding. Such annuities will be purchased from the Society or from any other insurer as provided for in the Rules and, if purchased from the Society, shall be based on the Society’s then current annuity rates for pensions business.”

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