Closed life company Phoenix Life has averted higher payments to around 22,000 savers after a High Court judge ruled in its favour over payments to with-profits policyholders.
Phoenix had taken the case to the courts, following talks with the Financial Services Authority (FSA) over the returns for holders of the Pearl Freedom Bond.
The case centred on how a guaranteed level of annuity featured as part of the bond was calculated. The bonds promised savers a guaranteed nominal capital sum, which would contribute towards the guaranteed level of annuity. If the capital sum was not enough to provide that level of annuity, Phoenix would have made up the difference.
Phoenix had claimed the nominal capital sum included bonus payments made as part of the policy. But the FSA, acting as defendant in ‘co-operative litigation’, claimed the sum should not include bonus payments.
Judge Andrew Smith said: ‘To my mind, there can be no real doubt about the proper interpretation of the Freedom Bond on the point in issue. It seems clear to me from the wording itself, given the nature of the instrument.’
A spokesman for the FSA said: ‘We had been in discussions with Phoenix in relation to how this product operates, and considered there was sufficient uncertainty regarding the wording of the insurance policy contract to seek an authoritative decision from the court as to how the policy operates.’