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Fos throws out eight in 10 annuity claims following surge

Fos throws out eight in 10 annuity claims following surge

Changes announced at the 2014 Budget to allow savers open access to their pensions prompted a surge in complaints over annuity policies which lock retirees into an income for life, but eight in 10 claims are being thrown out by the ombudsman.

Annuity and income drawdown complaints to the Financial Ombudsman Service are the only two categories in the pensions sector that saw increases in the last financial year, data has revealed.

Claims against advisers also doubled as a proportion of over complaints, but this was due to a 36 per cent fall in the total number of claims and the number against advisers specifically is actually down over the past year. Adviser complaints make up just 1 per cent of Fos workload.

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Over the past year, Fos received a total of 14,723 complaints involving investments and pensions. This represented 4 per cent of the total number of new cases it received during the year, a similar proportion to the previous year.

Fos’s annual review, published today, showed that overall pension complaints are down 2 per cent to 4,290 in the year to the end of March 2015.

Complaints about personal pensions, self invested personal pensions, pension mortgages and Serps also decreased, however complaints about annuities have rocketed by 29 per cent to 776 complaints and income drawdown complaints have also jumped 7 per cent to 180.

However, annuity uphold rates have plummeted from 32 per cent in the last financial year to 20 per cent at the end of March 2015. A Fos spokesperson told FTAdviser that just 148 of the 776 complaints went on to get an ombudsman’s decision.

Uphold rates for income drawdown at the end of March 2015 were 42 per cent, down from 49 per cent in the previous year. Just 92 of the 180 went to an ombudsman’s decision.

In total there were 2,875 complaints made about advisers, while this is less than the previous year’s figure of 3,599 complaints, the proportion has doubled because overall Fos complaints have fallen.

Fos’s data also showed that as a proportion of total complaints, adviser complaints have doubled from 0.5 per cent to 1 per cent and mortgage intermediary complaints have risen from 1 per cent to 2 per cent.

In the last financial year, life insurance and investment product providers also saw 0.5 per cent more complaints, rising from 2.5 to 3 per cent. Fund managers and stockbrokers also saw complaint number climb from 1.5 to 2 per cent.

In terms of the proportion of complaints ‘upheld’ in the consumer’s favour, advisers saw the total fall from 42 per cent in 2013/14 to 39 per cent in 2014/15.

Those intermediaries selling banking or mortgage products also saw their number of upheld cases fall slightly, from 37 per cent to 36 per cent year-on-year, while life insurance and investment providers saw their total fall from 29 per cent to 28 per cent.

Other figures from this year’s review showed that one in five initial enquiries turned into a formal dispute - a total of 329,509 new complaints - while 55 per cent of the cases resolved in 2014/2015 were found in the consumer’s favour.