Phoenix pays for poor record

By RICHARD DYSON
Updated:

 

Tens of thousands of with-profits pensions policyholders are to receive compensation for unfair treatment in the past.

David and Angela Rabbets, Phoenix pensionholders

The deal, which has not been publicised, will benefit those with pension plans originally held through Royal Life or SunAlliance.

Resolution, which now owns those companies under the Phoenix brand, is writing individually to current and former policyholders.

The compensation is being paid as a result of legal advice relating to the problem that virtually destroyed insurer Equitable Life in 2000.

As at Equitable, many Royal Life and SunAlliance policyholders had valuable guaranteed annuities attached to their pensions. When economic circumstances changed, the cost to the companies of these guaranteed annuities soared. The solution of the managements was to hack back the bonuses paid to policyholders.

Equitable policyholders argued that this was unfair and in 2000 they won a legal case. The financial implications for Equitable were so serious that the company was brought to the brink of bankruptcy. But similar actions by other insurers were not challenged.

Seven years later, Phoenix now appears to be making an attempt to put matters right.

Ian Maidens, chief actuary, says: 'When we bought these companies in 2005 from Royal & SunAlliance, we instituted a review to check that the practice was consistent with the Equitable ruling.'

He says that compensation will be paid to those who were given lower bonuses despite having held policies with guaranteed annuity rates. He says 'tens of thousands' of people are involved.

David Rabbets, from Oswestry, Shropshire, had a guaranteed annuity rate on the pension policy he started in the Seventies with Royal Life.

The 65-year-old retired newsagent, who is married to Angela, is now drawing his annuity. He has not yet heard from Phoenix regarding a refund, but he has been confused by a worrying mix-up that highlights the difficulty which policyholders have in understanding how complex with-profits policies are managed.

Phoenix recently suggested that the value of his pension pot had almost halved between April and December 2006. He later received a letter from Phoenix admitting that a 'system error' meant that statements could show values that were 'too high or too low'. The letter went on to say that the Financial Services Authority had been told of the problems.

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Pot of gold

Phoenix has now told David and Financial Mail that he has not suffered from unfairly reduced bonuses. The company says that errors involved in calculating policy values have been fixed. But David says his mind has not been put entirely at rest by the company's reassurances.

'You don't know how the pension is worked out,' he says. 'You have to trust them.'

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