Aviva Personal Pension Plan · CAS-39168-W8B3

CAS-39168-W8B3

Ombudsman’s Determination Applicant Mr S

Scheme Aviva Personal Pension Plan (the Plan)

Respondent Aviva

Outcome

Complaint summary

• Aviva’s transfer exit fees are unreasonable and unfair.

• Aviva claims on its website that it does not charge exit fees, this is misleading.

• Aviva has failed to provide a satisfactory response to his request for a detailed explanation of how it calculated the exit fee applied to his transfer value (the Exit Penalty).

Background information, including submissions from the parties

1 CAS-39168-W8B3 Section 1.10.4 of the Provisions, (Section 1.10.4), describes the terms for the provision of retirement benefits, or transfer to another scheme, before the Selected Retirement Date (SRD). It provides that the percentage of “Capital Units” (the Percentage) will be calculated by Sun Life at its sole discretion. This will allow for the loss of the “Fund Management and Additional Fund Management Charge” which would otherwise have accrued to Sun Life, during the period between the date of the encashment of the Capital Units and the SRD.

Section 1.10.14 states that where the period between the date of the encashment and the SRD is 15 years or less, the Percentage is obtained from the table included in Section 1.10.14 (the Table).

Section 4.4.1 of the Friends Life Personal Pension Policy Provisions dated April 2006 contains similar wording to Section 1.10.14. It also contains a table showing the percentages of the Capita Units payable on encashment, where the date of encashment of those units and the SRD is 15 years or less.

The Frequently Asked Questions (FAQ) published on Aviva’s website, indicated that generally there are no charges or penalties for transferring to a different pension provider. The FAQ cautioned that this depends on the type of pension plan and its terms and conditions.

“If you are transferring to, or away from, the Aviva Pension, we won’t make a charge but other providers may do so [emphasis added].”

2 CAS-39168-W8B3 On 14 August 2019, Aviva issued its response to Mr S’ complaint. Aviva advised that the exit penalties were calculated as a percentage of the “Capital Units” and were designed to recoup the costs involved in setting up pension plans.

Summary of Mr S’ position

• He has suffered a financial loss equivalent to the Exit Penalty. That loss amounts to £3,237.46. Aviva should pay an equivalent amount in redress to his pension plan with the Provider.

• He would like to see all such excessive exit fees made illegal. This would prevent others from being penalised in such an “unreasonable” manner. 3 CAS-39168-W8B3

• The original Policy was not sold to him personally. He did not see the terms and conditions of the Policy, or the terms in respect of the high early exit penalties.

• The information on exit fees displayed in the FAQ currently published on Aviva’s website, is very similar to the information displayed in the FAQ that he read around the time of the transfer.

• The FAQ did not mention exorbitant fees. It indicated that there were no charges or penalties for transferring to another pension provider. It stated that this depends on the type of pension held by the policyholder.

• Aviva made no attempt to contact him or to fully explain the calculation of the Exit Penalty. Aviva also failed to explain what appears to be a sliding scale based on the years remaining to SRD.

• On 20 August 2019, he asked Aviva for further clarification on the Exit Penalty. He expected a detailed breakdown of how the 20.9% Exit Penalty was calculated, based on the precise value of his pension pot at the date of the transfer. However, he did not receive a [detailed] response.

• Aviva should have provided a full explanation of the calculation of the Exit Penalty and how the amount of the Exit Penalty would change as he approached his SRD. This would have enabled him to make an informed decision before transferring his pension.

Aviva’s position

• The Exit Penalty was applied in line with the terms and conditions of the Policy. The Policy was a former “heritage” Friends Life policy. It became an Aviva managed policy following the acquisition of Friends Life by Aviva. The original terms and conditions remained in force following the acquisition.

• Aviva is unable to access a copy of the booklet detailing the original terms and conditions of the Policy. Aviva’s document storage facility is currently off-limits due to COVID-19.

• The section in the current booklet relating to Capita Unit charges is the same across all Aviva’s products as the function is identical: to recoup the loss of the expected standard 4.5% annual management charges on Capital units to SRD.

4 CAS-39168-W8B3 Adjudicator’s Opinion

The Adjudicator said that she was not aware of legislation that prevents Aviva from imposing the charges that have been applied in this case. In the circumstances, she was not convinced that the Ombudsman would direct that Aviva acts outside the provisions of the Policy and refund the Exit Penalty.

The Adjudicator considered that the percentage of Capital Units available on encashment, are written into the provisions that apply to the Policy. Although the Policy is now with Friends Life, this does not change the provisions under which the Policy operated.

The Adjudicator acknowledged that the FAQ published on Aviva’s website stated that Aviva “generally” did not apply charges or penalties in respect of transfers to an alternative pension provider. The Adjudicator highlighted that the FAQ also stated that this would depend on the type of pension plan and its terms and conditions.

The Adjudicator said that even if she were to accept that Aviva did not make the position sufficiently clear in the FAQ, this would not materially change the outcome in the circumstances.

The Adjudicator noted that Aviva made the Provider aware on 15 July 2019, that an exit penalty would apply should Mr S proceed with the transfer.

The Adjudicator said that Aviva had provided a satisfactory explanation on 5 November 2019, of how the Exit Penalty was calculated. Albeit belatedly.

• Mr S has asked that I determine his complaint. Mr S says he is not a pensions or legal expert. Consequently, he cannot dispute the Adjudicator’s view.

• Mr S says he appreciates that this has no bearing on his case, nonetheless he made eight separate transfers to the Provider in 2019. He was charged a maximum fee of £20 by the other pension providers. Furthermore, his other pensions had performed far better than his pension under the Plan.

• Mr S says it is evident that his pension with Sun Life, eventually taken over by Aviva, made significant money for individuals and/or companies other than him, possibly due to unreasonable terms and conditions. Irrespective of the outcome of

5 CAS-39168-W8B3 his complaint, he is confident that I would be seeking to prevent what he considers to be “disgraceful” practices by “unscrupulous” companies.

Ombudsman’s decision

I do not uphold the complaint.

Anthony Arter

Pensions Ombudsman 8 January 2021

6