CompaniesMay 22 2015

Fos complaints, reforms consequences: This week’s news

twitter-iconfacebook-iconlinkedin-iconmail-iconprint-icon
Search supported by
Fos complaints, reforms consequences: This week’s news

Earlier this week, complaints data was published by the Financial Ombudsman Service which showed that while total pension complaints had fallen slightly, there were increases in annuities and drawdown complaints.

Pensions continue to dominate headlines, with elsewhere data showing what clients are (or are not) doing with their pots and whether advisers are seeing business increase due to the reforms.

Here’s a round-up of the top five key themes from this week’s news:

1. Adviser complaints have dropped - and doubled.

Data published this week showed that while the number of adviser complaints dropped to 2,875 - the lowest since 2012 - the proportion of adviser complaints have actually doubled as the total number of ombudsman complaints feel 36 per cent amid a slowing of PPI claims.

Advisers still represent a tiny proportion of the workload, with just 1 per cent of total complaints. The uphold rate is 33 per cent for cases up to 14 years old - and 30 per cent for cases that are at least 15 years old. That’s down from 35 per cent and up from 28 per cent respectively.

As reported by FTAdviser, annuity and drawdown complaints saw an upward swing, respectively both increasing by 29 per cent and 7 per cent.

However, these areas should give advisers some comfort as that uphold rates for both products have fallen: annuities from 32 per cent to 20 per cent and income drawdown rates from 49 per cent to 42 per cent. Fears of retroactive judgement might be overdone.

With a surge in pension complaints driven by the pension freedoms expected over the next few years, it will be very interesting to see how this trend pans out.

2. Pension freedoms overseas consequences.

FTAdviser revealed this week that transfers to Australian pension schemes on behalf of emigrating UK savers through one firm are being halted due to wrangling over the new rules to prevent pension freedoms abuse.

This could see swathes of overseas pensions lose their rights to preserve UK tax relief.

Pension Transfer Specialists, a company based in Australia that specialises in transfers from UK pension schemes, circulated an email suggesting that HMRC should back down, after it emerged that new rules could leave savers facing hefty penalty charges.

The communication follows a letter sent to overseas pension schemes last month backdating regulations to 6 April, when pension freedoms came into force, seeking schemes to confirm compliance with age restrictions on pension access.

Schemes must not allow access to pension savings before the age of 55 or they face losing their registered status. This would trigger 55 per cent ‘unauthorised’ charges and potentially even additional 15 per cent penalty fees.

It’s not turned out to be the easy transition some had hoped to include overseas scheme savings within the UK freedoms.

3. Do referrals lead to paid work?

As revealed in January, advisers will pay £4.2m towards the pension freedoms ‘guidance guarantee’ levy, with the overall initial industry levy for 2015/16 hitting £35m. Other groups will pay £7.7m.

However, the Association of Professional Advisers does not believe a 50 per cent reduction is good enough, arguing the cut for advisers should be increased to 75 per cent. Chris Hannant, Apfa director general, said “early experience” shows advisers have not seen a surge in guidance referrals.

On the other hand, according to Aviva, advisers are seeing “record levels” of new referrals from their clients as a direct result of the pension freedoms.

One adviser pointed out in the comments that “enquiries and referrals are one thing, but actually making money is something else”. Timewasters that don’t go on to a full advice process could outweigh the benefit, he argued.

Only time will tell whether advisers will really benefit from the reforms.

4. No queues at Lamborghini showrooms.

It appears, from data so far revealed, that the public are more responsible than what the industry thought. According to My Pension Expert, during the last month only 1 per cent of customers have opted to strip out their pension fund in one go - the majority of which have smaller pension pots.

There are a number of reasons why this figure has been so low, according to the retirement income specialist. In particular it looks like people are put off by the tax implications and longevity risks.

It really does not make sense for people to withdraw their funds from a tax wrapper which can now been passed on through generations, just to sit in the bank.

5. Start of online roll-out but where is simplified?

FTAdviser reported this week that execution-only broker TD Direct Investing has been granted regulatory permissions to provide non-personal online ‘advice’, which will allow it to develop model portfolios and other tools for those less engaged investors.

Quite a few firms, including LV, have been building hubs to push for further consumer engagement on retirement, however few have launched a simplified proposition. Just Retirement has also launched a service that is designed to be used by other providers.

All firms trying to engage consumers on retirement should be applauded but what people need to see are simplified propositions where it won’t cost hundreds of pounds for someone to tell you which product you need.

This segment continues to be a case of ‘watch this space’.

donia.o’loughlin@ft.com