Defined Benefit  

Transfer value reduction dominates Fos complaints

Transfer value reduction dominates Fos complaints

Reduced transfer values are the most prominent issue when it comes to complaints about pension transfers, the ombudsman has revealed.

According to data revealed yesterday at a Westminster and City conference in London, the Financial Ombudsman Service has received 144 cases on transfer value changes since the introduction of the pension freedoms, which represent 43.1 per cent of all complaints about pension transfers.

From the total of cases received in this area, 95 have been closed, at an uphold rate of 48 per cent.

These are followed by 121 cases brought in relation to advice suitability, which had an uphold rate of 42 per cent.

Final salary pension schemes provide a cash equivalent transfer value which is valid for a three-month period. If the transfer doesn’t occur in this timeline, the pension fund trustees can review the figure, which might be higher or lower than the previous number.

This a trend the Fos has been noticing for some months now.

Last November, officials at the body stated: "Many of the complaints we receive about pension transfers centre on delays – with people telling us they missed out on higher transfer values because a financial adviser didn’t act quickly enough."

Sir Steve Webb, former pensions minister and director of policy at Royal London, said: "The biggest complaint area at present is where delays in the process mean that a new transfer value has to be issued and this is below the previous amount. 

"Much more needs to be done to streamline the process, including the implementation of the much-delayed template for DB schemes to provide standardised information to advisers."

FTAdviser reported in August 2017 that The Pensions Regulator had responded to industry calls for standard rules to help the DB transfer process, which should reduce the amount of information requests from advisers, and the time spent on this process.

The work on this template is now in the hands of the Pensions Administration Standards Association, which is expected to produce a draft in the next few months.

Issue

Total cases

Closed

No change in outcome

Change in outcome

Uphold rate

Advice not to transfer

39

22

16

6

27%

Charges for advice

20

13

10

2

17%

Decline to advise

10

8

6

2

25%

Reduction in CETV

144

95

48

44

48%

Suitability

121

36

11

8

42%

Total

334

174

91

62

41%

Alan Chan, director and chartered financial planner at IFS Wealth & Pensions, explained that the whole transfer and advice process takes time and often clients do not realise this. 

He said: "Schemes are notoriously slow at dealing with transfer requests and although CETVs are guaranteed for a three-month period, they may not be sent to the adviser until a few weeks later so you don’t actually get the full three months."

Mr Chan also noted that some consumers request the CETVs themselves well before they’ve even found an adviser they want to engage with, "without realising that the advice process can be lengthy, and rightly so for a complex area". 

He said: "We’ve had clients come to us asking us to ‘just sign their transfer papers’ and their deadline is next week.

"So these clients are expecting a five-minute job to just sign the papers rather than realising that it is the advice they are paying for and not the rubber stamp on their papers. So if they do not allow enough time, they could miss the deadline.