The Pensions Freedoms and FOS – trends in complaints and enquiries
FOS has published a response to the Treasury's consultation paper looking at early exit penalties, the transfer process and communications with consumers in relation to financial advice on pensions.
The consultation closed on 21 October 2015. The FOS has responded to the consultation paper by looking at the complaints in has received in the first 6 months of the pension freedoms (from April 2015 to October 2015). It is important to note that this data does not include any evidence from the pensions ombudsman whose remit is to look at the administration and/or management of personal and occupational pensions and also state pensions.
FOS received 7,537 pension enquiries during 2014/2015 and 7,871 in 2013/2014, this was a substantial increase from 2,456 pension enquires in 2012/2013; the FOS notes that it is difficult to attribute the increase to any one factor and that before the pension freedoms were announced in April 2014 there appears to already have existed an increasing interest in pensions. Despite the increase in pension enquiries, the number of complaints has remained relatively steady over this same period with 4,401 in 2012/2013, 4,361 in 2013/2014 and 4,290 in 2014/2015. In relation to complaints, most complaints are in relation to personal pension plans, self-invested personal pensions and annuities with annuity complaints having increased 29% in 2014/2015 compared to 2013/2014 despite an overall reduction in pension complaints. There was also an increase in the number of SIPP complaints, with 75% of these complaints relating to advice to invest in unregulated collective investment schemes.
The focus of the paper is on what lessons FOS has learned from the first 6 months of the pension freedoms. The paper notes that there has been an increase in pension enquiries since the onset of the pension freedoms with 4,717 pension enquiries in the period 6 April 2015 to 6 October 2015 compared to 3,942 in the same period in 2014; an increase of 20%.
In relation to the number of pension complaints for the period 6 April 2015 to 6 October 2015, FOS received 2,435 pension complaints compared to 2,340 for the same period in 2014; an increase of 4%. Of this total FOS considers that the "pure" pension freedoms enquiries totalled 760, with 150complaints. Of the total 150 complaints, 76 have been closed and 52 rejected. The 23 remaining complaints were upheld in the consumers' favour and one was dismissed as being better suited for the pensions ombudsman. There is one published FOS decision regarding the new pension freedoms.
The breakdown in relation to the 150 complaints is as follows:
(1) Exit charges and fees accounted - 7 complaints
(2) Pension transfers - 37 complaints
These complaints included difficulties contacting the pension provider and delays in relation to releasing money.
(3) Poor administration - 19 complaints
This includes dissatisfaction with the fund value, wrong forms being sent, taxation and the failure to follow instructions.
(4) Misinformation – 14 complaints
Including where consumers had been provided with incorrect or misleading information about the pension freedoms, for example, when they were told that they could access their pension freedoms before they reached 55.
(5) Financial advice – 23 complaints
Consumers have made a number of complaints to FOS regarding the requirement to take advice and how that applied. This is where FOS published its first decision in relation to the pension freedoms and specifically the need to take advice on a lump sum payment. Mr S complained that he could not take the lump sum without obtaining financial advice but he was having difficulty obtaining that advice. FOS rejected the complaint.
(6) Annuities – 20 complaints
17 of the complaints were made by consumers expressing dissatisfaction that they were unable to utilise the new pension freedoms.
(7) Existing products would not allow access to the new pension freedoms – 15 complaints
The paper also refers to insistent clients and that the FOS appreciates the interest in the issue and that firms are looking for clarity as to how FOS approaches insistent clients in relation to complaints. Despite this acknowledgment no further guidance is provided.
Overall the pension freedoms to date have not produced a substantial increase in complaints albeit they have introduced new areas for consumers to complain about (such as the inability to access the freedoms via their existing pension product). It may be that once drawdown funds start to dwindle that we see an increase in complaints, but for the time being at least the pension freedoms have not introduced a wave of complaints.