Background
I have a unit linked personal pension policy that includes life cover with Aviva Life & Pensions.
In 2000 I suspended payments, the pension benefit was then marked ‘’paid up’’. The company advised life cover remained in force and the cost of providing this benefit was deducted from the policy fund.
The company also advised in 2000, in writing, that I could pay a reduced premium for life cover only, to protect my pension fund. I instructed the company, in writing, to proceed with this arrangement. I have been paying this premium ever since, indexed at 5% annually.
In August 2012 the provider, following a review, advised me of a 340% increase in premium (Not a typo, 340% instead of the usual 5%) to maintain my life cover. They stated that the current cost of life cover was far greater than my premium, that this cost was being deducted over the years from my pension fund, which would soon be depleted, so that an increase in premium was now required to maintain cover over the remaining term. Based on their projections, even with the increased premium, I would also have no pension fund value at retirement age.
This was news to me as I always understood I had an arrangement in place whereby I paid for life cover in full to protect my small pension fund. This arrangement also meant I knew exactly how much I was paying for life cover and exactly how much it would be increased by each year.
Complaints procedure
I followed the complaints procedure with the provider to no avail and so took my case to the Ombudsman. The Ombudsman would not investigate my complaint, quoting the six year rule and saying it was six years from when the conduct complained of occurred and not from when one became aware of it.
I resubmitted my complaint, stating that while the conduct complained of first occurred twelve years ago, this same conduct was repeated every year thereafter to date, and that my complaint now only related to the previous six years. My complaint was then accepted by the Ombudsman as being within his remit.
My complaint
The provider for the past six years used my pension fund to supplement the cost of life cover. This was despite an arrangement being in place to pay for life cover and protect my pension fund. (I sent a copy of the letter from the provider offering this facility dated March 2000 and a letter dated June 2001 confirming life cover was currently being maintained through a monthly direct debit).
Scheduled reviews were not carried out in accordance with the T&Cs, the shortcomings that became apparent after the 2012 review would have been apparent much earlier and I could have dealt with them accordingly at that stage, had reviews been carried out.
Annual statements were only issued for some years and were misleading and vague.
Provider’s argument
Premiums index linked at 5% ‘’Contribute’’ but do not ‘’specifically fund’’ the cost of life cover.
The providers are entitled under the T&Cs to cash units as required to pay for life cover. The cost of providing cover is greater than the premium being paid, so the additional cost has been deducted from the pension fund.
There was an onus on the policy holder to read the policy and supporting documentation and be familiar with its workings and features.
Had scheduled reviews been carried out there would have been no need to increase the premium then payable, the first increase would only have been required after the 2012 review.
What I Wanted
Monies taken over the last six years from my pension fund, to supplement the cost of life cover, returned to my pension fund.
Main points of Ombudsman’s Finding
‘’The statements that were issued did not assist in any manner in clarifying the true position, or to identify the issues which are the subject of this complaint’’
The Ombudsman accepted that the policy allowed for cancellation of units to supplement the cost of life cover, but this was over ridden by the undertakings given by the company in their letters dated March 2000 and June 2001.
Consequently ‘’I find the company should in this instance be limited to charging the (indexed) premium agreed in March 2000 in respect of the life insurance benefit and that they should reimburse any additional amounts charged by deduction of units from the policy fund, to the policy fund. The Company should within 30 days of the date of this finding write to the Complainant confirming the amount of the required reimbursement and confirming that such reimbursement has been made.’’
The Ombudsman also noted the provider failed to carry out scheduled reviews in previous years stating; ‘’ whilst this may not have caused a financial impact on the complainant, it shows poor administration by the company. Had the reviews been conducted it could have brought the matter of policy reviews to the Complainant’s attention at an earlier date. I find that the company should pay €300 compensation to the Complainant for any inconvenience caused by these errors.’’
Conclusion
For the reasons outlined above the complaint is upheld pursuant to section 57 C1 (2) (g) of the Central Bank and Financial Services Authority of Ireland Act 2004.
End Result
€7K has since been reimbursed to my pension fund and €300 compensation has been received.
Point of note regarding six year rule
I think it is worth pointing out to those who only become aware of an issue after six years, that just because the conduct complained of first occurred more than six years ago, this might not preclude them from making a complaint for the previous six years only.
Six years refunds are far better than no refunds.
I have a unit linked personal pension policy that includes life cover with Aviva Life & Pensions.
In 2000 I suspended payments, the pension benefit was then marked ‘’paid up’’. The company advised life cover remained in force and the cost of providing this benefit was deducted from the policy fund.
The company also advised in 2000, in writing, that I could pay a reduced premium for life cover only, to protect my pension fund. I instructed the company, in writing, to proceed with this arrangement. I have been paying this premium ever since, indexed at 5% annually.
In August 2012 the provider, following a review, advised me of a 340% increase in premium (Not a typo, 340% instead of the usual 5%) to maintain my life cover. They stated that the current cost of life cover was far greater than my premium, that this cost was being deducted over the years from my pension fund, which would soon be depleted, so that an increase in premium was now required to maintain cover over the remaining term. Based on their projections, even with the increased premium, I would also have no pension fund value at retirement age.
This was news to me as I always understood I had an arrangement in place whereby I paid for life cover in full to protect my small pension fund. This arrangement also meant I knew exactly how much I was paying for life cover and exactly how much it would be increased by each year.
Complaints procedure
I followed the complaints procedure with the provider to no avail and so took my case to the Ombudsman. The Ombudsman would not investigate my complaint, quoting the six year rule and saying it was six years from when the conduct complained of occurred and not from when one became aware of it.
I resubmitted my complaint, stating that while the conduct complained of first occurred twelve years ago, this same conduct was repeated every year thereafter to date, and that my complaint now only related to the previous six years. My complaint was then accepted by the Ombudsman as being within his remit.
My complaint
The provider for the past six years used my pension fund to supplement the cost of life cover. This was despite an arrangement being in place to pay for life cover and protect my pension fund. (I sent a copy of the letter from the provider offering this facility dated March 2000 and a letter dated June 2001 confirming life cover was currently being maintained through a monthly direct debit).
Scheduled reviews were not carried out in accordance with the T&Cs, the shortcomings that became apparent after the 2012 review would have been apparent much earlier and I could have dealt with them accordingly at that stage, had reviews been carried out.
Annual statements were only issued for some years and were misleading and vague.
Provider’s argument
Premiums index linked at 5% ‘’Contribute’’ but do not ‘’specifically fund’’ the cost of life cover.
The providers are entitled under the T&Cs to cash units as required to pay for life cover. The cost of providing cover is greater than the premium being paid, so the additional cost has been deducted from the pension fund.
There was an onus on the policy holder to read the policy and supporting documentation and be familiar with its workings and features.
Had scheduled reviews been carried out there would have been no need to increase the premium then payable, the first increase would only have been required after the 2012 review.
What I Wanted
Monies taken over the last six years from my pension fund, to supplement the cost of life cover, returned to my pension fund.
Main points of Ombudsman’s Finding
‘’The statements that were issued did not assist in any manner in clarifying the true position, or to identify the issues which are the subject of this complaint’’
The Ombudsman accepted that the policy allowed for cancellation of units to supplement the cost of life cover, but this was over ridden by the undertakings given by the company in their letters dated March 2000 and June 2001.
Consequently ‘’I find the company should in this instance be limited to charging the (indexed) premium agreed in March 2000 in respect of the life insurance benefit and that they should reimburse any additional amounts charged by deduction of units from the policy fund, to the policy fund. The Company should within 30 days of the date of this finding write to the Complainant confirming the amount of the required reimbursement and confirming that such reimbursement has been made.’’
The Ombudsman also noted the provider failed to carry out scheduled reviews in previous years stating; ‘’ whilst this may not have caused a financial impact on the complainant, it shows poor administration by the company. Had the reviews been conducted it could have brought the matter of policy reviews to the Complainant’s attention at an earlier date. I find that the company should pay €300 compensation to the Complainant for any inconvenience caused by these errors.’’
Conclusion
For the reasons outlined above the complaint is upheld pursuant to section 57 C1 (2) (g) of the Central Bank and Financial Services Authority of Ireland Act 2004.
End Result
€7K has since been reimbursed to my pension fund and €300 compensation has been received.
Point of note regarding six year rule
I think it is worth pointing out to those who only become aware of an issue after six years, that just because the conduct complained of first occurred more than six years ago, this might not preclude them from making a complaint for the previous six years only.
Six years refunds are far better than no refunds.
