Imminent Pension Ombudsman decisions relating to complaints of insurers refusing to transfer pensions due to suspected pension liberation, will clarify trustees’ position and emphasise their duties, pensions minister Steve Webb has said.
During an exclusive ‘Ask the pensions minister’ Q&A session with FTAdviser sister title FT Money yesterday (8 January), Mr Webb was asked whether the government would act if the Pension Ombudsman rules in favour of complaints that companies should have blocked transfers.
He refused to be drawn on the findings and said simply that the ombudsman was “rightly independent” of government.
He added: “However, I hope that the rulings that he gives will help to clarify the situation for trustees and others as to their duties when a scheme member wishes to transfer money into another scheme about which they may have concerns.”
FTAdviser understands the ombudsman is today set to publish a group of long-awaited pension liberation cases but have been blocked by their pension schemes, after nearly a year of deliberating.
Another question raised to the minister related to widespread concern people will be able to “blow their pensions and run out of money” from 6 April, to which Mr Webb responded that the government has made sure people have guaranteed independent guidance.
“There are good tax reasons not to take the pension in one go but to spread it out. It is also worth bearing in mind that by-and-large we are talking about people who have been sensible and prudent in their working life by saving for a pension and I doubt that many of these will become reckless and irresponsible in later life.”
Earlier this week providers warned that the reforms would make life easier for pension liberators, with Legal and General pensions strategy director Adrian Boulding pointing to a ‘landmark’ Pension Ombudsman decision last month.
In the decision, the ombudsman upheld a complaint against a pension liberation firm for failing to comply with a transfer request, but warned the claimant may need to take legal action to attempt to recover his fund of around £350,000 initially switched from a final salary scheme.
Mr Boulding told FTAdviser that at the moment insurers can usually stop “the dodgy ones”, but that from 6 April they will be obliged to transfer pension pots of those over age 55 into legitimate bank accounts, not knowing where the money will go thereafter.
Meanwhile, the Financial Ombudsman Service also asked for industry views on whether there will be a rise in pension-related complaints as the reforms are implemented.
The Q&A session also touched on Mr Webb’s controversial plans to create a ‘second hand’ annuity market, helping those already in guaranteed products also access the pension freedoms this Spring.
A question asked whether this market would be fraught with complications - for example people wanting to sell back their annuities having to undergo rigorous medical examinations - to which Mr Webb responded that there will need a good regime of consumer protection to make sure that if this new freedom is implemented, it is used by people for whom this is the right choice to make.
“As annuities are linked to the life expectancy of the policy holder, I would assume that there would be some form of health information gathered when the annuity was sold on, just as there often is when the annuity is bought.”
A public poll during the debate asking readers if they would sell any annuities they might already have if it were possible found little support for the idea, with 52.5 per cent saying no, 32.5 per cent stating they were not sure and just 15 per cent answering yes.
peter.walker@ft.com
