In its Public service governance and administration survey 2017 published last week (23 May), the watchdog revealed that these pension funds received an estimate of 12,753 complaints during the last year, with pension transfers being the base for 23 per cent of these grievances.
This represents an increase from the figures registered in the previous year, when public service schemes received an estimate of 8,011 complaints.
The survey, which was completed between 8 November and 28 December 2017, was answered by 191 of 207 public service schemes, which corresponds to a 92 per cent response rate, covering 98 per cent of members.
Matters involving pension transfers were more common among members of the Local Government Pension Scheme (LGPS), responsive for 31 per cent of the complaints to the plan.
The schemes for police and firefighters – the other two public service funds with autonomous findings in the research – registered 19 per cent and 8 per cent of complaints in connection with transfers, respectively.
Since April 2015 the number of people transferring out of their defined benefit (DB) pension transfers has been soaring, as savers seek to take advantage of sky-high transfer values and to move their nest eggs into defined contribution (DC) schemes in order to access them using pension freedoms.
According to figures from the Office of National Statistics (ONS), funds transferred out of pension schemes almost tripled to a record £34.2bn in 2017.
However, the new legislation also meant that transfers from unfunded public service pension schemes were stopped.
Overall, the most common complaints received by public sector schemes were related to ill health eligibility disputes (40 per cent), incorrect estimates of benefits (31 per cent) and slow or ineffective communication (30 per cent).
And despite more than 12,000 complaints, these only represent 0.08 per cent of all members, over 16.7m.
On average, 44 per cent of complaints entered the internal dispute resolution process, the report added.
According to Nathan Long, senior pension analyst at Hargreaves Lansdown, “people are now far more aware of their options when drawing from their pension”.
He said: “The lack of flexibility in DB pensions is directly opposed to the way that the retire-as-you-go generation expect to draw from their pensions, retaining control whilst supplementing their transition from work to retirement.
“Most people will benefit from retaining their DB pension and using any other savings to provide flexibility, however the perceived lack of control probably explains such a big leap in the number of complaints received.”
Martin Bamford, chartered financial planner and managing director of Informed Choice, said that there is a good chance this increase in complaints relates to public sector scheme members not being allowed to transfer if their plan is unfunded.
He said: "With a lot of news about pension transfers from other schemes, members of unfunded schemes in the public sector might be feeling short changed by their inability to give up a guaranteed pension income for a cash equivalent transfer value, to exercise their pension freedoms.
"Even if transfers from these schemes were allowed, in practice it probably isn’t a good idea to move anyway.
"The rise in complaints could also relate to poor scheme administration and service. There’s been a great deal of pressure on pension scheme administrators since pension freedoms were introduced and gilt yields fell, inflating cash equivalent transfer values.
"The workload for scheme administrators has risen sharply and their capacity doesn’t appear to have changed very much. This means longer waiting times for queries and transfers to be completed, so more complaints in this context aren’t surprising."
maria.espadinha@ft.com
