Aegon UK forced to admit pensions blunder

Thousands of retired people with pensions from life insurer Aegon UK have been told they may have funds worth a quarter less than they had thought.

They are the victims of a systems error at the Edinburgh-based company which meant that it failed to deduct the tax free lump sum which people usually withdraw from their funds when they retire, from the value of their remaining pension pot.

The foul up means people were told that their savings were worth substantially more than they had originally thought.

The problem has hit around 7,000 people who have income drawdown plans - an alternative to annuities aimed at people with substantial savings who are willing to take a little more risk than most. It allows them to stave off buying an annuity until they are 75.

While no one has actually lost money as a result of the error it does mean that they may have withdrawn much more than they realistically should have, leaving them with less than they had planned to fund the final years of their retirements.

Aegon started selling the plans in 1995, and it is thought the error goes back to at least 2000/2001. An investigation has been launched and in the meantime processes are being carried out manually.

The company said it was not able to ignore the error because the funds are linked to its "unitised with profits fund" from which people with overvalued pensions were taking An Aegon spokesman said: "As we do not believe there has been any actual financial loss, there may be no grounds for compensation. We will review any complaints on a case by case basis.

"Once we have fully investigated this issue and identified how many customers are affected, we will provide a full detailed explanation to them and will ensure that our systems are corrected to reflect the true value of their funds."