Personal Pension Plan Decision Reference 2022-0079

• Case Outcome: Upheld
• Subject Matter: Personal Pension Plan
• Reference: 2022-0079
• Date: 03 March 2022
• Finantial Sector: Investment
• Conducts Complained Of: Failure to advise on key product/service features,Failure to provide correct information, Maladministration

Decision Ref:

2022-0079

Sector:

Investment

Product / Service:

Personal Pension Plan

Conduct(s) complained of:

Failure to advise on key product/service features

Failure to provide correct information

Maladministration

Outcome:

Upheld

LEGALLY BINDING DECISION OF THE FINANCIAL SERVICES AND PENSIONS OMBUDSMAN

The complaint concerns a personal pension policy held by the Complainant with the

Provider.

The Complainant’s Case

In 1994, the Complainant’s policy was taken out with the Provider’s predecessor. The

Complainant says that 20 years later, the policy was taken over by the Provider in 2014.

The Complainant submits that in November 2011, it became necessary to take a premium

holiday in respect of the policy, due to the recession and a drop-off in his business. The

Complainant states that in 2013, he was asked to resume payment of the premium before

he would be permitted to avail of a further premium break. The Complainant contends that

he therefore decided to resume payments of €200 month, to avoid the policy becoming

paid-up.

The Complainant submits that in early 2015, he was advised that after April 2015, he would

no longer be permitted to increase his contributions. As a result, the Complainant decided

to increase his contributions to €300 per month, which he submits was all that he could

afford at that time.

The Complainant says that the Provider then advised that it would allow no more increases

in contributions to the pension fund. He says that he complained to the Provider about the

restriction, as it was contrary to the reasons why the Complainant had taken out the pension

plan in the first place in 1994, which was to allow him flexibility in his contributions because

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/Cont’d…

he was a sole trader. The Complainant submits that making increased contributions was

allowed for within the original policy provisions agreed and put in place in 1994.

The Complainant says that not being able to increase his contributions will affect him after

his retirement. He submits that it is recommended that a person contribute up to 25% of

their salary, to ensure a reasonable standard of living in retirement and to obtain the

maximum income tax relief available to the individual. At the time when he ma de his

complaint to this Office he submitted that his current contributions stood at approximately

5% or 6% of salary, so they were neither sufficient for his future needs, nor tax efficient.

The Complainant submits that he has not been in a position to avail of the optimum levels

of income tax relief on premiums. He has submitted a table which he says shows the tax

relief that he would have been entitled to, if he had been allowed to contribute at a higher

level. He submits that this demonstrates additional income tax overpaid for the five-year

period in question, at €11,304.

In one table, the Complainant has presented calculations of the estimated shortfall in the

pension plan due to not making increased contributions. He has estimated that between

2015 and 2019, he would have made additional contributions of €32,184. He estimates that

the growth rate in his pension fund of those additional contributions would amount to

€4,877.52 using a simple interest calculation. The table sets out further calculations on the

contributions which he argues would have been made to the fund, and what those

additional contributions would mean for the fund value. The Complainant submits that the

total shortfall in the fund value over the relevant period, amounts to €37,061.52 (on the

assumption that those additional contributions of €32,184 had actually been made).

The Complainant has submitted evidence that the sum of €19,204.04 was put aside by him

to a savings account during the relevant period, representing pension contributions he was

not allowed to make.

The Complainant has also submitted a letter from his accountant dated 16 December 2019

setting out his ability to increase pension contributions during the years 2015 to 2019. The

accountant confirms that additional contributions which could have been made during the

period 2015 to 2019 were in the sum of €26,136, which would have resulted in tax savings

of approximately €10,500.

The Complainant has advised that the Provider has subsequently confirmed that he can

increase his monthly contributions and it will allow one-off single premium payments also.

In response to submissions from the Provider, the Complainant argues that the Provider is

incorrect to say that the operation of clause 3(g) of the policy terms and con ditions (which

provides for top ups) is discretionary. He argues that clause 3(g) is related to clause 4 which

provides for increases in contributions to account for inflation. He argues that the clause

does not permit or justify the actions of capping the contributions, and does not give the

Provider the power to do so.