Secondary

evidence

Tribunal orders Adjudicator to reopen case into policy conversion

The Financial Services Tribunal has ordered the Pension Funds Adjudicator to reopen a complaint against Old Mutual involving the alleged conversion of a policy to an annuity without the client’s consent.

The Adjudicator closed the case in September last year because of a lack of evidence.

New information and documentation have subsequently been placed before the tribunal.

In November 2010, Old Mutual informed the applicant (“MH”) that the GrowPlan Retirement Annuity Fund would be terminated, and its assets and liabilities transferred to the South African Retirement Annuity Fund (Saraf). The letter also informed MH that all the benefits as provided in the policy would continue after the transfer.

Although MH was given the option of transferring his benefits to any other approved RA fund, Saraf was the default option. MH did not select an alternative RA, so his benefits were transferred to Saraf.

In a letter in March last year confirming the transfer to Saraf, Old Mutual once again stated that MH’s benefits would not be affected by the transfer.

However, at the tribunal hearing, MH said he no longer has the same benefits as he did under GrowPlan.

As a result, the tribunal asked Old Mutual to provide it with a copy of GrowPlan’s rules. The tribunal has directed the Adjudicator to investigate these issues, specifically whether MH is entitled to the same benefits he had under GrowPlan after the conversion to Saraf.

Pension quote

After the transfer to Saraf, MH asked Old Mutual for quote of his monthly pension income (not the fund values). Old Mutual said it could calculate his monthly pension only once it had received a completed annuity selection form showing how he wanted his benefit to be split (cash and compulsory annuity).

The form provided five options in respect of a compulsory annuity, one of which was the Max Income Annuity.

MH told the Adjudicator that an Old Mutual adviser informed him telephonically that his policy had been converted to the Max Income Annuity. MH denied that he agreed to this conversion.

The tribunal said the record showed that MH has not completed or signed the selection form, and therefore his policy was converted without his consent.

Old Mutual told MH he should approach one of its advisers or an independent adviser for a quote. According to MH, he spoke to two Old Mutual advisers and engaged an independent adviser, but without success.

The tribunal said an examination of GrowPlan’s rules showed a methodology is used to determine the “fund pension” for each member.

According to information it had received from Old Mutual, once a member selects an annuity option, he or she is locked in and cannot change his or her mind.

The tribunal asked rhetorically whether this was sufficient grounds for a quote to be generated, or whether MH should take the risk of making a selection without a quote and be locked-in even if he was not satisfied with the pension.

The question that needs to be answered is whether MH was provided with adequate information to enable him to make an informed selection or decision.

It directed the Adjudicator to investigate the issues that have come to its attention.

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