Zurich Assurance Ltd · DRN-6182857

The complaint Mr S complains that his personal pension plan, now with Zurich Assurance Ltd (Zurich), was mis-sold to him. Mr S says the way he could take his pension benefits was misrepresented and he’s seeking compensation for trouble and upset and financial loss. What happened Mr S has a personal pension plan with Zurich (originally Allied Dunbar). The policy was set up in June 1988. Mr S says the representative who sold him the plan said he’d be able to take 25% of his pension fund as a tax-free cash lump sum. Mr S has now found out that he can’t take just his tax-free cash. Unless he wants to fully encash the policy, he’ll need to transfer to another provider who offers a drawdown option which Zurich doesn’t. Mr S’s complaint was considered by one of our investigators. In her view she first considered jurisdiction – whether the complaint had been made in time. She referred to DISP (Dispute Resolution) 2.8.2R. The complaint had clearly been made outside the primary six year period but, for the reasons she gave, she said the complaint had been made within three years of when Mr S became aware (or ought reasonably to have become aware) he had cause for complaint. He hadn’t found out until 2023 that he couldn’t access his pension as he wanted to. He’d complained in 2025, which was within three years. So his complaint had been made in time. The investigator went on to consider the merits. But she didn’t uphold the complaint. Her main points were: • The policy document showed that benefits were intended to be taken as an annuity. There were four annuity options. The last said that up to a 30% lump sum could be taken with a lower income. The option of taking a lump sum and leaving the remaining fund invested with Zurich wasn’t an option. • However, Mr S had said he’d been told by the representative that was an option. We couldn’t say for certain what had been said but the paperwork didn’t support that. • Mr S had said he wouldn’t have gone ahead with the policy if he’d understood he wouldn’t be able to take a lump sum without transferring to a new provider. But he was only 24 years old when he took out the policy. It was unlikely he’d have given great thought as to how he’d take his retirement benefits. And the representative couldn’t have informed Mr S of the limitation as it didn’t exist at the time. • Although the policy terms and conditions meant that Mr S would have to buy an annuity, he now had more flexibility due to the introduction of the pensions freedoms. Zurich accepted what the investigator said about jurisdiction and consented to us considering the complaint. Zurich didn’t comment further on the merits. Mr S didn’t accept the investigator’s findings about the merits and asked for an ombudsman’s final decision. Mr S’s main points were: • The regulatory framework in 1988 differed from today but personal pensions were

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subject to regulation under the Financial Services Act 1986 and oversight by bodies such as LAUTRO. The then principles reflected those of the current regulator, the Financial Conduct Authority (FCA). Such as the need for clear, fair, not misleading communications and suitable financial advice. Those aren’t new concepts but longstanding expectations within financial services. • At the time, advisers were required to explain key product features and ensure the consumer understood any significant restrictions. • The policy documentation refers to annuity options, including a lump sum. But it didn’t explain that tax-free cash could only be accessed through annuitisation or that it wouldn’t be possible to take a lump sum while leaving the remaining funds invested. A consumer reading that “up to 30% may be taken as a lump sum” could reasonably understand that to mean access to tax-free cash at retirement, without necessarily appreciating it was conditional upon purchasing an annuity. • What the investigator had said, about whether, when he took the policy out, he’d have been thinking about how he’d take his retirement benefits, might rely on a generalised assumption, rather than evidence specific to his circumstances and when suitability must be assessed individually. The purpose of regulated advice is to ensure that consumers, regardless of age or occupation, understand the essential features and limitations of the recommended product. A younger consumer committing to a long-term financial contract may be more reliant on the adviser’s explanation, not less. • His complaint wasn’t based on the subsequent introduction of pension freedoms or legislative changes but on whether the structural limitation inherent in the particular policy was sufficiently explained at inception. The fact that pension access has since evolved doesn’t remove the need to assess whether he’d been properly informed of the product’s constraints at the time. • He’d suffered detriment in discovering, late in the process, that his pension can’t operate in the way he’d reasonably understood and where a transfer to another provider is required to achieve flexibility. • He recognised the difficulty in assessing advice given nearly four decades ago when documentary standards were different and detailed suitability reports weren’t routinely produced. But, where a consumer’s understanding of a key feature differs from how the product now operates and the contemporaneous documents don’t clearly highlight that limitation, raises a legitimate question as to whether the explanation at the point of sale was sufficiently clear. Mr S later emphasised that he’d been approached by the representative – he hadn’t sought out advice. He’d relied entirely on the representative to provide a full and clear explanation of the product, including all the risks and limitations. He’d trusted that the recommendation was in his best interest. 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 done so, I agree with the investigator’s views. I don’t have much to add. Zurich accepted what the investigator said about jurisdiction and consented to us considering the complaint. So I’m not going to comment on jurisdiction and I’ll just deal with the merits. Mr S has made other complaints about the policy but this complaint is that the policy was mis-sold.

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As Mr S recognises, I make my decision based on what’s fair and reasonable in all the circumstances of the case. The contemporaneous documentary evidence does carry weight but I reach my conclusions in the light of all the available evidence. Here that includes what Mr S recalls about what was (and wasn’t) discussed. Although, as Mr S recognises, given the time that’s elapsed, there are difficulties – recollections will invariably fade over time. And, where the evidence is incomplete, inconclusive or contradictory, I reach my conclusions on the balance of probabilities – that is, what I think is more likely than not to have happened, based on all the available evidence and the wider surrounding circumstances. I note what Mr S says about having been approached by Zurich’s (then Allied Dunbar) representative. But, even if Mr S wasn’t actively looking to start a pension plan, he did go ahead with the policy. So I think it still comes down to whether the policy was appropriate for him and if there were any other issues, such as if he was misled as to how the policy would operate and the benefits it would provide. I don’t disagree with Mr S that the need for information to be clear and not misleading is a longstanding requirement. The Financial Services Act 1986 came into force on 29 April 1988 and so the sale of Mr S’s policy was subject to that. And, even before then, there were common law requirements about not making mis-statements, disclosing all material information and advising with reasonable skill and care. Most advisers were also members of FIMBRA or LAUTRO – here Allied Dunbar was a member of the latter. LAUTRO’s advisers were bound by a Code of Conduct which required them to give ‘best advice’ and exercise ‘due skill, care and diligence’ and ‘deal fairly with investors’. But it is the case that standards are higher today and are subject to continuous improvement – for example, the more recently introduced Consumer Duty. When Zurich and the investigator considered Mr S’s complaint it seemed to be on the basis that the representative had told Mr S that he’d be able to take 25% of his fund as tax-free cash and leave the remaining fund as a drawdown arrangement – which isn’t possible and which Mr S says was misrepresentation. But, from what Mr S has said more recently, it seems it’s more that he’s unhappy that the representative failed to point out to him that it wouldn’t be possible to do that. I’ve considered things from both perspectives. If the representative said that there was an option to take a lump sum without buying an annuity, that wasn’t consistent with the policy documentation. Sections 6 to 8 set out the pension (annuity) that will be payable, depending on whether the pension starts at the selected retirement date or before or after. And Section 9 deals with the policyholder’s options – which include taking the open market option or commuting part of the pension (annuity) for a lump sum. Mr S would’ve also been given a booklet which explained how the policy would work. Under the heading, ‘What do I get at retirement?’, it said: ‘When you retire, the total fund of money built up is used to provide you with a lifetime retirement income, called an “annuity”. So an annuity was, at the time, the only option that the policy provided. As to what was discussed, I don’t immediately see why the representative would’ve said something which didn’t fit with what the policy and the booklet said. That would only likely lead to queries from consumers as to why any other options hadn’t been included in the booklet. I also bear in mind the wider circumstances and the prevailing pension regime at the time where annuity purchase was the default option. I don’t see it’s likely that the

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representative would’ve told Mr S there was an option which wasn’t covered in the policy documents and which wasn’t available at the time anyway. I’ve also thought about whether the representative should’ve pointed out what Mr S terms a limitation to the policy and the benefits it provided, or rather the way in which benefits could be taken. That is, only as an annuity with or without tax-free cash. I agree with Mr S, and to use up to date terminology, that information should be fair, clear and not misleading. And that disadvantages, risks and limitations should be pointed out. But I don’t think that always translates into an obligation to explain everything that a product won’t provide. Here, an annuity was the objective of the policy and I think that was made clear and Mr S ought reasonably to have realised that. How the policy would work and the benefits it would provide, including tax-free cash, has to be viewed in that context. The last option the booklet mentioned was taking up to approximately one third of the fund as a tax-free cash lump sum. In which case the resulting income would be based on the balance of the fund and so would be lower. I think it was clear that, even if tax-free cash was taken, an annuity would still be purchased with the residual fund. I can’t agree with Mr S that it wasn’t made clear that the tax-free cash was ‘conditional’ on buying an annuity. That was the core benefit offered, with or without tax-free cash. Mr S has said he wouldn’t have gone ahead with the policy if he’d understood the correct position. But, from what I’ve seen, he was given clear information as to how the policy would work and the benefits it would provide, including if he decided to take a tax-free lump sum. So I consider he made a properly informed decision to take out the policy. As to suitability more generally, from what I’ve seen, it was appropriate for Mr S to start saving for his retirement. My final decision I’m not upholding the complaint and I’m not making any award. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr S to accept or reject my decision before 8 April 2026. Lesley Stead Ombudsman

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