Norwich Union to pay compensationPension provider admits £11m error

13 November 2008

Money

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Pension customers with Norwich Union will receive a slice of £11m of compensation after the insurer uncovered a charging error.

Some 34,000 people who bought stakeholder pensions after they were introduced in April 2001 will be handed back an average of £300 each.

The insurer, which is owned by Aviva, had been charging people more than the government's 1% cap on charges.

The error was discovered during a review ahead of regulatory changes.

"We identified the problem ourselves and acted as soon as possible to refund customers. We have kept the Financial Services Authority fully informed," said a Norwich Union spokesman.

Retirees to be sent cheque

People with these products and who have already retired will be sent a cheque in the next few weeks.

Those yet to draw their pension will see their pension values restored to the level that would have been in place without the error.

Employers with five or more employees who do not offer any kind of pension scheme have to provide access to a stakeholder scheme.

The government had wanted the scheme to be a transparent and low-cost way of saving for retirement.

The Norwich Union review was run to ensure that the insurer complied with a new regulatory system to be brought in by the City watchdog.

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