Questions of Cash: Confusion over pension protection: The Independent


Q. I have a stakeholder pension with Aviva/Norwich Union which I am no longer contributing to. What protection is there for pension holders in case Aviva goes bankrupt? NL, Sheffield.


A. There is serious confusion over the level of protection for people like you with stakeholder pensions. Your fund is guaranteed by the Financial Services Compensation Scheme, but there is a difference of opinion about the extent of compensation. The FSCS insisted in a series of conversations with us that stakeholder pensions are treated as investments. On this basis there is very limited compensation: 100 per cent for the first £30,000, 90 per cent for the next £20,000 and no statutory protection above that. The FSCS says that stakeholder pensions are treated differently from other pension products, which are covered as long-term insurance policies and have a 100 per cent guarantee on the first £2,000 in a scheme and 90 per cent on the remainder. The FSCS’s interpretation of the legal situation came as a shock to both Norwich Union and Tom McPhail, pensions fund manager at advisers Hargreaves Lansdown. Both said their understanding is that stakeholder pensions are treated in the same way as other pensions and long-term insurance products. Aviva believes that the FSCS’s interpretation of its own compensation arrangements is wrong. McPhail suggests that even if it is correct, in practice the Government would probably feel obliged to provide additional financial support to affected policyholders. Our view is that the level of guarantee provided on stakeholder pensions is likely to become the subject of much greater attention now that this conflict has been revealed – not least because it raises doubts about the advisability of putting money into a stakeholder pension with this modest level of guaranteed protection. But McPhail adds: “It is also worth noting that for the vast bulk of investors in pensions, ISAs and so on, their investments are ring-fenced from the fortunes of the Norwich Union company. The only people carrying significant risk are those in with-profit funds.” The extent of the confusion over guarantees was underlined by a comment from a spokesman for the Pensions Protection Fund, who said he didn’t know who would provide compensation, “but it is definitely not us”. Aviva is the name now used by Norwich Union. It reported a loss for last year of £885m, compared with a profit for the previous year of £1.5bn. At present, Aviva does not appear to be in the same level of difficulty as banks, although it announced plans this week to cut almost 1,700 jobs. Meanwhile Standard & Poor’s has downgraded Aviva’s credit rating to A, though this remains an investment grade rating.

Q. Twice in two months I have been charged £35 by Halifax for “exceeding my overdraft limit”. Yet each time a credit has gone into my account on the same day, which was more than enough to cover the amount withdrawn. On the afternoon of 2 January, I paid cash into my account to cover a direct debit due that day. On 2 March, I again paid cash into my account to cover a direct debit, this time paying it in during the morning to avoid the account going overdrawn. On both occasions I was charged a fee for an unauthorised overdraft, despite the account not being overdrawn at the end of that day’s business, or the previous day’s business. I understood it was the balance at the close of business that counted. LG, Macclesfield.

A. Halifax states that its terms and conditions explain there must be sufficient funds in an account to cover a direct debit at the close of business the day before it is due. On this basis, Halifax argues that its charges were correct. It is not prepared to waive the charges as a goodwill gesture, having refunded bank charges to you on three previous occasions.

Q. I am a customer of Virgin Media. When it was NTL, my account was always dated the 20th of the month, with a settlement date two weeks later. But since August 2007 the bill dates have become erratic. My account for March 2009 was dated the 13th with a settlement date of the 2nd April. This is a full week earlier than usual. I want my invoices to revert to the 20th of the month. MS, Swansea.

A. Virgin Media said: “We have changed the billing date, but customers are still being charged for the same period, so the customer is not being overcharged.” So although your bills are dated earlier, you have not been charged more, nor are you paying your account earlier.

Q. I took out an RAC motor insurance policy last December and was promised a cashback payment of £35, to be supplied within six to eight weeks. But I still have not received the payment. ZH, Sutton Coldfield.

A. The RAC says that an administrative oversight caused an initial delay. This was made worse by a delay in the post of a cheque sent to you last month. As an apology, RAC owner Norwich Union/Aviva has issued an additional cheque for £50, covering the £35 cashback, plus £15 as a goodwill gesture. So instead of getting £35, you will now receive £85.

Questions of Cash cannot give individual advice. But if you have a financial dilemma, we’ll do our best to help. Please email us at:

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