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Small print could cost thousands

From the Echo, first published Monday 21st Jun 2004.

NOT checking the small print of your pension could cost you thousands of pounds when you retire, warn independent financial advisers.

IFA Atkins Bland saw one client facing the loss of £7,000 from their pension fund because of a one month time limit set by their insurer Norwich Union.

One client failed to provide Norwich Union with instructions on how they wanted to take their pension benefits within a month of the policy's maturity date.

His brother was dying so he delayed a decision on his own retirement by up to four months after the Norwich Union policy matured.

Many personal pensions are linked to a life assurer's with profits fund which is designed to provide certain guarantees on retirement.

In most cases these guaranteed minimum values apply at maturity date and beyond but - in the case of some Norwich Union policies - the guarantees are withdrawn if the benefits are not taken within one month of retirement.

Atkins Bland MD Kevin Bland said: "With the pensions industry already in a state of disrepute following the mis-selling scandal and the appalling management decisions of Equitable Life, it seems astonishing that a major life insurance company would adopt practices almost guaranteed to produce more distrust on the part of the investing public.

"Norwich Union knew that it would impose these conditions but made no serious attempt to protect the interests of the policyholder which could easily have been achieved by switching the money out of the with profits fund at maturity."

Atkins Bland successfully appealed to Norwich Union which reversed its decision in this particular case.

A Norwich Union spokesman said they contacted policy holders "six to eight weeks" before their retirement "to help them reach a decision" about their pensions.

"Clearly it's not practical to have these things go on forever. There are some people who ignore everything we send them and at some point we have to make a judgement about what to do.

"We have to make certain assumptions. We cannot just leave the policy in limbo."

He said that "clearly with the benefit of hindsight, there were some good reasons" why there had been delays in this case.

"It's not a big issue and it's not about small print. This is a process which works for most of the time. It's not a matter of doing very nicely by it. When we understood the concerns, we gave them the extra time. It's as simple as that. I'm not quite sure why the IFA thought it was necessary to suggest it was a big issue."

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