Zurich Assurance Ltd · DRN-6172484

The complaint Mr L complains about the advice Zurich Assurance Ltd (Zurich) gave him to take out a number of different pension plans in quick succession from 1998. He doesn’t think the plans were all necessary and believes they were only recommended to generate more commission and charges. He says these charges have negatively impacted the performance of the plans and in one case the current value is less than the value of the contributions that he made. He also complains that the costs weren’t adequately explained to him and that the lack of annual statements issued meant he couldn’t take action to improve the plan’s performance. What happened I understand Mr L first met with Zurich in mid-1998 when it recommended that he take out a personal pension plan (PPP) and advised him to contract out of the State Earnings Related Pension Scheme (SERPS). But an unexpected change in Mr L’s employment situation meant that he didn’t make contributions to the PPP and subsequently he set up his own limited company. So in late 1998 Zurich recommended that Mr L start up an Executive Pension Plan (EPP) – which had some different features and benefits to the PPP – and contributions were made by the company rather than Mr L personally. But by June 2000 Mr L’s circumstances had changed again and contributions to his EPP ceased and Zurich advised him to start another PPP with contributions set at £350 per month. Mr L increased the level of his contributions to the plan but in 2002 they ceased and the PPP was made “paid up.” The plans remained in force over the years – but without any further contributions – until in September 2025 Mr L complained about the performance of EPP plan as it was now worth less than what he had paid in. Zurich confirmed to Mr L the plans that he held. It distinguished between the plan which had received contributions from Mr L contracting out of SERPS and those where he had made personal contributions. It explained that it set out all its charges at inception and had followed the terms and charging structures of each plan. Regarding the plans where contributions had ceased quite early in the term of the plans, it explained that because the Reduced Allocation Period (RAP) had not been reached only 35% of the contributions made during this period had only been allocated to the plan – which could explain why the EPP’s current plan value was below the overall contribution value. Mr L wasn’t happy with this response and brought his complaint to us where one of our investigators looked into the matter. They didn’t think the complaint should be upheld making the following points in support of their assessment: • It was important to note the regulatory requirements for advisers at the time of Zurich’s recommendations. Advisers were required to act in a consumer’s best interest and ensure recommendations were suitable in light of the circumstances. In addition, it was important to consider existing arrangements and to ensure there was no unnecessary repetition of plans driven purely by advice. • There were sufficient technical reasons for each of the pension recommendations –

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principally Mr L’s change of employment situation. There was no evidence to suggest Mr L was advised to stop contributing to a suitable plan, nor of any losses or increased changes which were incurred as a result. • There was no evidence that Zurich’s advice met the definition of “churning.” • The evidence supported the idea that the different pension arrangements were suitable for Mr L’s circumstances at the time and that Zurich acted fairly and reasonably in each case. Mr L didn’t agree. He said we’d failed to take into consideration that Zurich hasn’t sent him any “pension statements, annual valuations or other meaningful communications” in relation to his pensions, which he says might have enabled him to review his plans and take alternative actions regarding their performance. He also said that information about the EPP isn’t available online and therefore he can only obtain valuations by contacting Zurich using the EPP reference number – which he doesn’t have. So he didn’t have a reasonable means of monitoring that particular plan over the years. He thought these ongoing administrative and communication issues did cause him a financial loss and detriment because he didn’t have the opportunity to take action on his plans. The investigator said they weren’t persuaded to change their view on the suitability of Zurich’s overall advice. And in respect of the complaint about a lack of ongoing communication, they were satisfied that Zurich hadn’t failed in its ongoing administrative responsibilities in such a way that caused a financial loss. They said it wasn’t a requirement for a business to provide information about (mainly historic) products online and they hadn’t seen any evidence to suggest that Zurich had restricted Mr L in contacting it to request any valuations or other information he might have required. Mr L said he still thought he’d been poorly advised. He said it wasn’t reasonable to expect a plan into which he’d paid £5,300 to be worth less than that 25 years later. He thought that as the plan wasn’t invested in high-risk investments it should be worth more and concluded that the problem had been excessive costs and fees. He asked for his complaint to be referred to an ombudsman and so it’s been passed to me to review. What I’ve decided – and why I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. And having done so I’ve reached the same conclusion as the investigator. I imagine Mr L will be disappointed with this outcome – so I’ll explain my reasons below. The suitability and quality of the advice When Mr L first met with an adviser from Zurich he was employed, with no occupational pension scheme available to him, and he was 23 years of age. Zurich recommended that he start a PPP as well as contracting out of SERPS. As he had no existing pension provision, I don’t think it was unreasonable for Zurich to make its recommendation, but Mr L’s circumstances changed quickly afterwards, and he was unable to afford to pay into the PPP. I don’t think that changed whether the advice was suitable as it was simply an unforeseen change in circumstances which led to affordability issues. However the situation regarding contracting out of SERPS was different, SERPS was a top-up to the basic state pension

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which meant that in an addition to their basic state pension consumers would also receive a SERPS pension at retirement. But the government brought in regulation so that consumers could choose to opt out of SERPS, also known as contracting-out. This meant that instead of accruing the additional state pension, they could build up other benefits by redirecting some of their national insurance (NI) contributions to a PPP – or by joining an occupational pension scheme (OPS) that was contracted-out. There was little government guidance around “contracting out” so providers generally took four main factors into account when considering whether to advise someone to contract out or not. These were: • The “pivotal” age, which was an age when the provider thought it reasonable to assume a consumer would benefit from contracting out – usually thought to be “the younger the better”. • The current salary and whether it met any minimum earning requirement the provider had set. • A consumer’s attitude to risk and whether there was an occupational pension scheme available to join. So, I’ve looked at the information that was known at the time to assess if the advice was suitable and if Mr L was eligible to contract out of SERPS. The fact find document that Zurich completed stated that Mr L didn’t have an occupational scheme available to him – and I’ve seen no evidence to suggest that wasn’t the case at the time. So I think Zurich was entitled to rely on that as confirmation there was no scheme available. The age at which a provider’s advice of whether or not to contract-out might change was called a “pivotal age.” At the time of this advice, when the provider was called Allied Dunbar, its own rules noted that it had a maximum age of 53 for males in 1998. Mr L was 23 at the time and so was significantly below the pivotal age. And based on the conservative assumptions used, it was thought in broad terms that men beneath the pivotal age would be better off contracting out of SERPS. In Mr L’s case there was around 30 years before it was likely advice would be for him to contract back into SERPS – which would suggest, given the investment horizon available, that it was in his best interest to contract out. Another factor used to determine whether someone was likely to be better off contracting out of SERPS was their earnings. Zurich had no minimum salary requirement at the time, although Mr L’s annual earnings – which were noted as being £22,000, were above the lower earnings limit which was considered to be enough to ensure that rebates forwarded by the government would generally cover the charges of the PPP. So, and considering Mr L had over 30 years until possible early retirement, I think there’s sufficient evidence to demonstrate that contracting out of SERPS was in his best interest at that time. I note that the funds were invested in a broadly higher medium risk strategy and with all the other factors noted above I don’t think that was unsuitable for Mr L’s circumstances at the time. Mr L’s financial position meant that he wasn’t able to make personal contributions as recommended to that PPP. But the plan continued so that in any year Mr L was eligible, the appropriate portion of his NI contributions would be applied to the PPP. There was no reason to stop the plan because if Mr L was no longer eligible, for example becoming self- employed or joining an occupational pension scheme which incorporated opting out of SERPS, the yearly NI contributions just simply wouldn’t be sent to his PPP.

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But Mr L’s circumstances did change and he set up his own limited company. He was then able to make contributions to a pension plan. Zurich advised Mr L to start an EPP. There were a number of reasons why this was in an employer’s – as Mr L was at that point – best interests. There was potential to reduce the amount of corporation tax a limited company might have to pay, to reduce an employee’s salary – thereby saving national insurance – and making up the overall income through dividends, and also enhancing the final salary at retirement to significantly increase the amount of tax free cash available. Contributions were also made by the limited company and not the employee, in this case Mr L. So I don’t think it was unsuitable for Zurich to recommend such a plan in 1998 when Mr L set up his limited company. There were additional benefits that made it advantageous to do this rather than contribute to a PPP. But these benefits, and the way an EPP was structured (set up under a trust deed and rules), meant that Mr L couldn’t continue to contribute to the plan when his circumstances changed again in 2000 and he moved to a salaried employed position. If Mr L were to continue funding a pension then he would have to make personal contributions and, if there was no occupational scheme available – which I understand was the case here – then he needed to take out a new PPP. Zurich has confirmed that Mr L, as well as not being eligible to continue contributing to the EPP, couldn’t make contributions to his contracted out of SERPS PPP, so the recommendation was to start a new PPP at the same funding level as the EPP. As with the EPP I don’t think this was unsuitable. The new plan was the correct recommendation for his circumstances and the only reason for the change was a “technical” switch because of the rules and regulations in contributing to different kinds of pension plans – depending on Mr L’s employment status. So I’ve concluded that the different recommendations Zurich made during the period from 1998 to 2000 were suitable and addressed Mr L’s changing circumstances during this time. Were the various plans all necessary? In his complaint to us Mr L has suggested that Zurich’s actions in recommending five different pension plans to him were unnecessary and driven by commission and fees rather than being in his long term interest. He has pointed to the current value of his EPP which he says is lower than the value of the contributions he made. He said that isn’t fair and he would have been better off not investing his money. So I’ve looked into whether there was any evidence of “churning” plans and whether all the costs and fees of each plan were explained to Mr L, or details provided to him which outlined the various charges. I’ve already established that there were justifiable reasons for recommending the various plans. And for completeness although Mr L has referred to five separate plans I understand that two of the plans – namely the PPP which was linked to the plan used to contract out of SERPS – and a third PPP, both weren’t used or didn’t accept any contributions. So I think it’s reasonable to consider the three “active” plans that were recommended and used here. But in the case of this advice I haven’t seen any evidence to suggest that “churning” or as defined by the regulator “a series of transactions that are each suitable when viewed in isolation… but are made with a frequency that is not in the best interest of the clients” occurred here. There were good reasons relating to Mr L’s changes of employment status to justify the recommendations and I’ve seen nothing to support the claim that an existing suitable plan was replaced or contributions were directed from a plan which could have met Mr L’s needs at the time.

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And in respect of the charges that were incurred I’ve seen evidence to show that the an explanation and “tariff” of charges for each plan was made available to Mr L. This was supported by appropriate illustrations and recommendation reports in each case. Thereafter the evidence would suggest that Zurich applied the charges as it said it would and I’ve seen no evidence of additional penalties that were applied outside of those already set out. In the case of the EPP, where Mr L says the value of the plan is now less than the contributions he made, I think this is potentially explained by the RAP that applied because Mr L had to take out a PPP within two years of starting the EPP. Zurich explained that during the RAP “we use 35% of the regular payments to buy units in the chosen fund and the remainder to cover the costs of setting up the plan or each new investment level to it. The RAP will apply for the same number of months as the contribution payment term (CPT). Once the RAP has expired, we will buy regular payments at 105% for the remainder of the CPT.” In this case the RAP was 30 months so only 35% of Mr L’s contributions were invested for the time the plan was active. This might explain why the fund value isn’t currently above the value of the contributions made. I imagine Mr L will say this charge isn’t fair and has caused him a financial loss but, while the current situation is unfortunate, Zurich set out details of the RAP in its terms and conditions and has applied them in the way it said it would – so I can’t say it’s acted unfairly here. Outside of the RAP the other charges were, a bid and offer spread, an expense deduction which only applied during the RAP, and a 1% annual management charge. I haven’t seen anything to support the idea these charges weren’t explained and applied in the way they should be. And in respect of a suggestion of possible churning from the EPP to PPP I understand that the setting up costs from the EPP were taken into account in respect of costs for the new PPP. So there was no financial disadvantage to Mr L in switching to a plan which better suited his circumstances at that time. I know Mr L has said he is disappointed in the value of the EPP and that the overall performance of all the plans has been affected by charges that he wasn’t aware of and which were exaggerated by the number of new plans that were set up in short space of time. But there’s no evidence to suggest Zurich has acted unfairly in applying the charges which were set out initially and nothing to suggest these actions were taken to enhance the overall level of charges to benefit Zurich unfairly. The lack of administration and communication In his response to the investigator’s assessment Mr L also said that he hadn’t been able to review the value of his pensions and therefore couldn’t take any action to mitigate their position. He said this was because Zurich didn’t send him any annual statements, meaningful communication, or attempt to contact him. He also says it isn’t possible to obtain a value of the EPP through the online portal. So I asked Zurich to confirm what documentation it had sent Mr L over the years. It confirmed it had issued statements for all the pension plans up to 2017 when, following the return of the September 2017 statement being marked “address unknown”, it updated its records and no further statements were issued until 2022 when Mr L updated his address. The statements are still held on file by Zurich from 2005, so I have no reason to dispute they were issued. Zurich has confirmed the address they were sent to – which is the address held on record for Mr L at the time – so I’ve no reason to dispute they weren’t sent to Mr L either, especially as one was returned unknown in 2017 following delivery to the address.

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I’ve noted that there were changes to Mr L’s address over the years so it could be that he didn’t receive statements if he had moved to a new address during that time – but I can’t be sure about that. But in any case, I’m satisfied Zurich did send Mr L regular statements containing yearly valuations of his plan, so I can’t reasonably conclude that it was a lack of information that caused Mr L not to take any action regarding his plans and their perceived lack of performance. If Mr L wanted information on his plans in order to review them and potentially take action, he was free to contact Zurich at any time and request this information. I haven’t seen any evidence that Zurich prevented him from doing so. I know Mr L believes that even if he’d been aware of the online portal he couldn’t have got a valuation because details of the EPP weren’t available online. But the EPP wasn’t taken out as an online product so there was no obligation for Zurich to provide details of it online. As I’ve already said, if Mr L felt he wasn’t being updated about his plans – or hadn’t received annual statements – he was free to contact Zurich to request such information as he might want in order to review and re-evaluate his plans and potentially take action to mitigate the performance. Summary I haven’t seen any persuasive evidence to support the claim that Zurich provided unsuitable advice or treated Mr L unfairly by recommending new plans when the existing ones still met his needs. In each case I think there were good reasons to recommend the plans which were because of legitimate changes in Mr L’s circumstances and employment status. I’m satisfied that the charges of each plan were explained to him and that he wasn’t financially disadvantaged by the set-up costs which applied to the new PPP. I’m satisfied that Zurich applied charges in the way it said it would according to its terms and conditions – which were available to Mr L at inception. It was unfortunate that Mr L’s changing circumstances meant that one plan in particular wasn’t in force long enough to benefit from a higher allocation of premiums. But that wasn’t Zurich’s fault and I can’t reasonably say it treated Mr L unfairly in respect of the charges it applied. And there’s no evidence that Zurich didn’t meet its regulatory obligations in issuing Mr L with yearly statements for all his plans. If these weren’t received, I think the available evidence might point to the addresses held for Mr L causing such a problem, although I don’t dispute what Mr L says about not receiving information. But in any case, if Mr L did have concerns about a lack of ongoing information or just wanted to know how his pensions were performing at any point, he could have sought and obtained that information directly from Zurich. My final decision For the reasons that I’ve given I don’t uphold Mr L’s complaint. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr L to accept or reject my decision before 23 April 2026. Keith Lawrence Ombudsman

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