A pension company is promising compensation for delays in calculating valuations, says Susannah Kirkman
The Prudential has assured teachers that it will compensate anyone who has missed out because of delays in issuing valuations of additional voluntary contributions (AVCs) for teachers who retired last August.
Swift valuations are essential if teachers are to get the best deal in annuities, as annuity rates have been falling rapidly and AVC funds must be used to purchase an annuity. Earlier this month the Prudential still had 112 retirements to process, but it has promised to make good any financial loss suffered.
The company has said it will offer the best annuity rate available from the Prudential during the 10-day period when it is calculating the value of the AVC fund. If it takes Prudential longer than 10 working days to process a retirement, it will offer the teacher the best annuity rate available on the open market during that period.
Richard Wright of Godfrey Pearson and Partners, an independent financial adviser, has already negotiated compensation for one of his teacher-clients who retired in August but did not receive a valuation of his AVC fund until October 5.
Mr Wright says that Prudential has agreed to transfer the pension fund to the company offering the highest annuity rate and has paid about Pounds 1,500 to ensure that his client suffered no financial loss.
According to Mr Wright, teachers are being denied the opportunity to trawl the free market for the most favourable annuity rate if their AVC quotation arrives late. He says they end up having to accept the Prudential's rate because the other companies' rates have fallen since their retirement date. Prudential should offer teachers the best rate available from any company during the 10-day calculation period, Mr Wright says.
Prudential blames the delays on the late arrival of information from Teachers' Pensions and employers. To process a retirement, the company needs a maximum benefit statement from TP and the final AVC contribution from the teacher's local education authority or school.
To administer the teachers' AVC scheme, the company deals with contributions from about 2,500 sources, all of which have different payroll cycles.
The company now says that some of the 112 teachers whose retirements have not been processed may have changed their minds about retiring, as it has still not received maximum benefit statements from TP.
However, it seems that the service which Prudential offers teachers does not compare very favourably with some other in-house AVC schemes. Health service employees, for instance, get speedier service from Equitable Life, which manages their in-house AVC scheme.
A spokesman for Equitable Life said that the company usually sent out valuations of members' AVC funds shortly before they actually retired. Unlike the Prudential, Equitable Life does not wait until the last AVC contribution has arrived before calculating an AVC fund; the final sum is added later, avoiding a considerable delay.
Another crucial difference is that Equitable Life does not take very long to work out the value of an AVC fund. "Once we have received notification of a member's retirement, we send out annuity details within two or three days, " the spokesman said.