Aviva Life & Pensions UK Limited · DRN-6200979

The complaint Ms M complains that Aviva Life & Pensions UK Limited didn’t use the correct fund value when it paid her pension benefits and she’s suffered loss as a result. What happened Ms M had a personal pension policy with Aviva. She received a quotation dated 26 April 2025. It stated that the value of her fund (as at 26 April 2025) was £188,146.87 and the assumed retirement date was 24 April 2025. The letter included various options for her to access her benefits. She decided that she wanted to take the maximum tax-free cash from her pension and use the residual balance to purchase an annuity from Aviva. This was detailed as Option 2 in the quotation pack she received. She completed the application form that was included in the pack and returned it to Aviva. Aviva processed her application. On 11 June 2025 she received a letter from Aviva. It included the following information: - The retirement date was 24 April 2025. - The total fund value was £189,865.08. - A tax-free lump sum of £47,466.27 had been paid into her nominated account. - An in-house annuity of £9,653.28 (per annum) would be payable monthly in arrears with the first payment being made on 24 May 2025. Ms M says she telephoned Aviva about this. She said there’d been a delay processing her application. She’d checked the fund value on 20 May 2025, and it was £194,038.56 at that date. She didn’t think her fund value would have dropped by around £4,000. She thought Aviva should re-work the amount of the tax-free cash and the annuity. She complained to Aviva. Aviva investigated her complaint. It acknowledged that it had delayed processing her claim by 8 days. It also acknowledged it could have handled her telephone call better and it could have provided her with more information about why the value of her policy had fallen. However, it did not agree with what she’d said about the reduced value of the policy. Aviva said that, as advertised on its website, it would honour a quotation it issued for 40 days. Ms M had returned her application on 9 May which was within that period. So, it said the value of her pension was as of 24 April 2025. Aviva said it would make sure Ms M didn’t lose out financially because of the delay and poor service she’d experienced. It said it would carry out a financial assessment to see if she’d experienced a loss because of its delay. It also paid her £250 for the inconvenience she’d been caused. Aviva says it subsequently completed the financial assessment and Ms M had not experienced a loss because of its delay. Ms M disagreed. She referred her complaint to our service. Our investigator looked into her complaint. She noted that Aviva had agreed to honour its quote if the policy holder returned

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it within 40 days. Although the value of Ms M’s pension may have increased before her claim was processed, our investigator said she would still have expected Aviva to base the annuity on the value at the date of the quote. She thought it had done that. Aviva had also agreed to calculate whether Ms M had suffered a loss because of its delay in setting up the annuity. And it had paid her £250 for the level of service she’d received. Our investigator thought this was fair. She didn’t expect Aviva to have to do anything further to resolve this complaint. Ms M remained dissatisfied. By way of summary, she said: - She’d returned her claim form to Aviva on 6 May 2025. - Aviva had informed her on 3 June 2025 that the value of her fund was £189,865.08 rather than the higher amount she’d seen online on 20 May 2025. - The quotation she’d been sent on 26 April had stated that investments could go up and down. - She didn’t think Aviva should use the April figure to calculate her benefits. Our investigator considered what Ms M said, but she didn’t change her view. So, the complaint was passed to me to decide. I issued a provisional decision in which I said: What I’ve provisionally decided – and why I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. The crux of Ms M’s complaint is that Aviva did not use the correct fund value when it processed her application for the tax-free lump sum to be paid to her. She also says it didn’t use the correct value when it calculated the annuity that it paid to her. I asked Aviva to provide further information about how it had calculated the payments made to Ms M. However, it has provided inconsistent and conflicting information to our service: • In its final response letter, it told Ms M that the value of her pension was “as of 24 April 2025.” • 23 January 2026 - It said the value paid to Ms M was the value finally calculated with a liability date of 29 May 2025 which it said was the date it received the signed options form. • 27 January 2026 – it said the signed options form was received on 9 May 2025 and this was the liability date used. • 27 January 2026 – it sent a copy of its financial loss assessment. This included an actual liability date of 24 April 2025 and a revised liability date of 23 April 2025. The correspondence sent to Ms M also included information which was inconsistent. So, when considering this complaint, I’ve thought about what should have happened. What fund value should Aviva have used when it processed Ms M’s claim? Ms M signed the options form on 6 May 2025. In its most recent response to our service, Aviva says that it received Ms M’s application on 9 May 2025. It says that was the liability date. And having considered everything, I’m satisfied, on balance, that 9 May 2025 is the date that Aviva should use when determining what Ms M’s fund value was for the purposes of calculating her tax-free cash and the amount that was available to purchase the annuity. I’ll explain why.

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In its final response letter Aviva said: “In respect of the reduced value I am unable to uphold. ...We have issued quotes with an assumed retirement date of 24th April. Currently as advertised on our website, we will honour the date of your quote if you respond with (sic) 40 days…. As you returned your request to take benefits on 9th May, the value of your pension was as of 24th April.” However, as Ms M has pointed out the quotation she received on 26 April stated: “We’ll work out the final value of your plan on your actual retirement date or when we have received everything we need, if this is a later date. Please remember your value could go down as well as up and is not guaranteed.” Pages 13 and 14 of the quotation set out the options where the consumer wanted an income for life with Aviva. There were two options - one with tax free cash and one without tax free cash. Under the heading “Please bear in mind” the following wording appeared: “All the options shown are examples of the income you could receive when you retire. The actual amounts you receive could be different as your retirement fund could go down as well as up.” I’ve also noted that after she received the quotation dated 26 April 2025, Ms M made a further contribution to her pension on 5 May 2025. Aviva has confirmed it received everything it needed to process Ms M’s request on 9 May 2025. So, it wasn’t until 9 May 2025 that the actual value of her pension fund could be determined. Aviva has referred to the “40 day” period that is mentioned on its website. I’ve looked at what the website says: “[dated 27 May 2025] We’re enhancing our current 40-day quote guarantee for Pension Annuities ...to simplify the journey and give customers more certainty…. Previously if a customer’s application wasn’t completed within the 40-day quote guarantee, they were exposed to Aviva rate changes. ..we’ve introduced a new rolling 40-day quote guarantee. We’ll use the current Aviva annuity rates to guarantee the customers’ income for another 40 days. This gives customers extra security and reassures them that their income is guaranteed, regardless of any changes to Aviva annuity rates during this period.” Having read the information in the quotation and the information on the website, I’m satisfied on balance that the information on the website refers to the fact that Aviva will honour the annuity rate that is used on the quotation - provided the options form is returned within 40 days. That was the position prior to 27 May 2025. After that date Aviva enhanced its quote guarantee further – as set out above. But I don’t need to consider that here since Ms M did return the completed form within 40 days. Having considered everything I’m satisfied, on balance, that the value of the fund

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itself can change between the date of the quotation and the date that everything is received by Aviva, before it then proceeds with setting up the annuity. That’s what the quotation dated 26 April 2025 stated. And it’s also consistent with what did happen here since Aviva used a different fund value when it settled Ms M’s claim to that which appeared on the quotation dated 26 April 2025. So, I’m provisionally satisfied, the liability date here, for purposes of valuing Ms M’s pension fund, should be 9 May 2025. What annuity rate should Aviva have used when it arranged the in-house annuity for her. As mentioned above Aviva agrees to honour the annuity rate that is used on the annuity quotation provided that the claim form is received within 40 days. Its website explains that the reason why it does this is to simplify the journey and give customers more certainty. I think that’s fair and reasonable. Ms M did return her application within the 40-day period. So, I’d expect Aviva to honour the annuity rate that it used when it issued the quotation. As I’ve already stated above, it’s important to point out that although the annuity rate should be honoured – the value of the fund could go up and down. And it is the value of the fund on the liability date that should be used when calculating the annuity amount – albeit the annuity rate used should be the same as that used on the quotation. When should Aviva have completed processing Ms M’s claim? Aviva says it received Ms M’s claim on 9 May 2025. It says that its usual processing time is 10 working days. That seems fair and reasonable. So, I’d have expected it to have completed the claim process, including crediting Ms M’s account with the tax- free cash sum, no later than 23 May 2025. It’s not clear when her account was credited. The advice note was issued to her on 11 June 2025. In relation to her annuity, the advice note stated that the annuity was purchased on 11 June 2025 and the first payment was due on 24 May 2025. The retirement date was the same date as that used on the annuity quotation which had been issued and which she’d accepted. It’s not clear when the first annuity payment was actually credited to Ms M’s account. What I’ve provisionally decided needs to be done to put things right In its final response letter, Aviva said it would make sure Ms M hadn’t lost out as a result of what had happened. It said it would investigate a revised timeline to look at what should have happened compared to what did happen. It has sent us a copy of the financial loss assessment it completed. By way of summary, it said: 1. Tax-free cash It had paid Ms M £47,466.27. Had there been no delay it said she would have received £47,322.91. The financial loss assessment stated that this was based on an actual liability date of 24 April 2025 when compared to a revised liability date of 23 April 2025 – although as I’ve mentioned above there has been inconsistent information concerning the liability date. So, Aviva said Ms M had made a gain and not a loss. 2. Annuity

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It was paying an annuity of £9,653.28 per annum. Had there been no delay it said her annuity would be £9,624.48 per annum. So, it said she was getting more than she would have got had there been no delay. 3. Payment date Her annuity had started from 24 April 2025. Had there been no delay it could have started 23 April 2025. However, any lost income for this period was offset by the gains referred to above. So, Ms M had not suffered any financial loss. I’d just comment that it’s difficult to reconcile the dates that Aviva has used regarding this aspect of its financial loss assessment bearing in mind that it didn’t receive the claim form until 9 May 2025. I’ve thought about what Aviva has said here. However, I’ve provisionally decided it needs to re-work its financial loss assessment as set out below: 1. The liability date should be 9 May 2025 – as Aviva has recently confirmed to our service. Aviva will need to determine what the value of Ms M’s pension was on 9 May 2025. That was the date when it received everything it needed to process her claim. 2. Determine how much tax-free cash she would have received based on the pension fund value as at 9 May 2025. If this is less than what she did receive Ms M will not have suffered any financial loss. If it is greater than what she did receive Aviva should: ➢ pay Ms M the difference between the amount of tax-free cash she received and the amount of tax-free cash she should have received (Amount A) ➢ pay 8% per annum simple interest* on Amount A from 23 May 2025 (which is the date when it should have completed processing her claim) until the date of settlement. 3. Determine what Ms M’s annuity would have been based on the residual value of her pension fund – valued as at 9 May 2025. Applying the annuity rates that were used in the quotation dated 26 April 2025 calculate what her annuity would have been. If this is less than the annuity she is being paid she will not have suffered any loss. If this is greater than the annuity she is being paid Aviva should: ➢ take the necessary steps to increase the amount of her annuity for all future payments. ➢ pay her the difference between the annuity payments she has received to date and the amount she should have received (Amount B) ➢ pay her 8% per annum simple interest* on the difference between each annuity amount she’s been paid to date, calculated from the date that each payment should have been made - with the first payment starting on 24 May 2025 - until the date of settlement. * If HMRC requires Aviva to deduct tax from this interest, Aviva must give Ms M a certificate showing how much tax it has deducted if she asks it to. Distress and Inconvenience

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Aviva has acknowledged that it provided poor service to Ms M. It said it could have handled her telephone call better after she first contacted it and it could have provided her with more information about why the value of her policy had fallen. I’ve thought about the impact of what happened here on Ms M. It has taken a reasonable effort on her part to try to sort the matter out – including having to progress her complaint to our service. Aviva has paid her £250 by way of compensation for the distress and inconvenience caused. Having considered everything, including our guidelines for awards of this nature, I’ve provisionally decided that the amount of compensation Aviva has already paid for distress and inconvenience is fair and reasonable. So, I don’t intend to require it to have to pay Ms M anything further by way of compensation for distress and inconvenience. My provisional decision For the reasons set out above I intend to uphold this complaint about Aviva Life & Pensions UK Limited. I intend to require it to take the actions set out above to resolve this complaint. Aviva responded to my provisional decision. It initially said that it had revalued the policy on 9 May 2025 and the value at that date was £189,865.08 – which was the amount it had used when it paid the benefits to Ms M. It said it had already paid late payment interest for the delay in completing the tax-free cash payment. Ms M did not agree with what Aviva said about the valuation on 9 May 2025. She said she had checked the value of her pension on a regular basis. On 5 May 2025 the value had been around £191,000 and on 12 May 2025, the value had been just under £192,000. Ms M also confirmed that she’d received the tax-free cash into her account on 5 June 2025 and the first annuity payment was received on 17 June 2025. In light of what Ms M had said, I asked Aviva to look at this again and also asked it to comment on the amount it had offered to pay for distress and inconvenience. Aviva responded to say that its actuarial team had now confirmed that the value of Ms M’s policy on 9 May 2025 was £191,711.21. It said it would re-work its financial loss assessment based on the revised valuation. It also said that since the matter had been referred to our service, it had offered to make an additional payment of £250 (being £500 in total) for distress and inconvenience. Ms M has confirmed the new fund valuation (as at 9 May 2025), which Aviva has now provided, is more in line with the figure she had previously stated. In the circumstances she said she would find it acceptable for Aviva to re-work the calculation of her tax-free cash and annuity based on this new valuation. She also said she was willing to accept the additional £250 offered by Aviva for the inconvenience she’d experienced. What I’ve decided – and why I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. Having considered everything again, I have not changed my view, or the reasons for my view about how this complaint should be resolved. As set out above, Aviva has now accepted that the valuation on 9 May 2025 should have been £191,711.21. Ms M has also accepted the revised fund valuation which Aviva has now provided. She says she finds it acceptable that Aviva should rework its financial loss assessment using that revised

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valuation. So, £191,711.21 is the fund valuation figure (as at 9 May 2025) which Aviva should use when carrying out its financial loss assessment. The financial loss assessment should be completed in the way set out in this decision. Aviva has confirmed it is willing to pay Ms M an additional amount of £250 (being £500 in total) by way of compensation for distress and inconvenience. Ms M has confirmed she will accept this offer. Having considered everything, I think this offer is fair and reasonable in all the circumstances that apply here. So, I’ve decided that Aviva should pay Ms M an additional £250 (being £500 in total) for distress and inconvenience. I do not require it to do anything further to resolve this complaint. My final decision For the reasons set out above, I uphold this complaint about Aviva Life & Pensions UK Limited. I now require it to take the following actions: • Re-work its financial loss assessment as set out below: 1. The liability date should be 9 May 2025. That was the date when it received everything it needed to process Ms M’s claim. Aviva Life & Pensions UK Limited has confirmed that the value of Ms M’s pension was £191,711.21 on 9 May 2025. That is the valuation it should use when completing this financial loss assessment. 2. Determine how much tax-free cash Ms M would have received based on the pension fund value as at 9 May 2025. If this is less than what she did receive Ms M will not have suffered any financial loss. If it is greater than what she did receive Aviva Life & Pensions UK Limited should: ➢ pay Ms M the difference between the amount of tax-free cash she received and the amount of tax-free cash she should have received (Amount A); and ➢ pay 8% per annum simple interest* on Amount A from 23 May 2025 (which is the date when it should have completed processing her claim) until the date of settlement. 3. Determine what Ms M’s annuity would have been, based on the residual value of her pension fund – valued as at 9 May 2025. Applying the annuity rates that were used in the quotation dated 26 April 2025 calculate what her annuity would have been. If this is less than the annuity she is being paid, she will not have suffered any loss. If this is greater than the annuity she is being paid Aviva Life & Pensions UK Limited should: ➢ take the necessary steps to increase the amount of Ms M’s annuity for all future payments; and ➢ pay Ms M the difference between the annuity payments she has received to date and the amount she should have received (Amount B); and ➢ pay her 8% per annum simple interest* on the difference between each annuity amount she’s been paid to date, calculated from the date that each payment should have been made - with the first payment starting on 24 May 2025 - until the date of settlement. * If HMRC requires Aviva Life & Pensions UK Limited to deduct tax from this interest,

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Aviva must give Ms M a certificate showing how much tax it has deducted if she asks it to. • Pay Ms M an additional £250 (being £500 in total) by way of compensation for distress and inconvenience as a result of what happened here. Under the rules of the Financial Ombudsman Service, I’m required to ask Ms M to accept or reject my decision before 7 April 2026. Irene Martin Ombudsman

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