IFA shames Friends Prov in with-profits bonus bungle

Friends Provident is facing calls to review hundreds of pension transfers after an IFA formally complained details about bonus guarantees had been left off a client's statement.

Miles Hendy (pictured), of Bristol-based Fraser Heath Financial Management, complained to Friends in 2010 about an incomplete policy details statement issued for a client considering a pension transfer, the Financial Times reports.

He says he told the life company its failure to include bonus information could have caused a £42,000 loss in his client's pension income if they had switched their policy based on the partial figures.

Hendy first alerted Friends Provident to the problem in 2008. The life company says an administrative error meant it failed to fix the issue until August 2010.

Hendy says many customers would have acted on poor information.

In the period these statements were issued without bonus information, 260 policyholders transferred out of their “paid up” policies.

Friends says “if it were clear a customer had transferred out of the fund and unknowingly given up guaranteed rights as a result, we would look to reinstate the policy”.

But it resisted calls to proactively check for consumer detriment, arguing other documents it issued would have given the customer the full picture.

Hendy says Friends Provident's reliance on an argument that the annual bonus statement is correct is "exceptionally weak".

Consumer group Which? is now calling on Friends Provident to contact policyholders to check if they had acted on the basis of an incomplete policy statement, and lost pension income.

“If they don’t the FSA should force them to do so”, principal policy adviser Dominic Lindley says.

The FSA warned with-profits companies in 2007 to take greater care with their customer communications so product features, such as valuable bonus guarantees, are not unclear or misleading.

In December last year the FSA fined pension provider Scottish Equitable £2.8m and ordered the firm to pay £60m in redress to hundreds of thousands of customers for poor administrative procedures.

Scottish Equitable was ordered to compensate customers who missed out on payments or benefits that they were entitled to or who were disadvantaged by its actions.