Defined Benefit  

Pension transfer complaints up 44%

Pension transfer complaints up 44%

The number of defined benefit transfer complaints received by the Financial Ombudsman Service has risen 44 per cent in 2018/19, compared with the previous year.

According to a freedom of information request by consultancy firm Duff & Phelps, the Fos received 798 complaints relating to pension transfers during 2018/19, of which 39 per cent were upheld.

In 2017/18, the Ombudsman received 553 complaints, with a 30 per cent uphold rate.

This comes after data from the Financial Conduct Authority out in June showed some 69 per cent of transfer clients have been advised to transfer out of their DB pension since the introduction of pension freedoms in 2015.

Mark Turner, Duff & Phelps' compliance and regulatory consulting managing director, said: “Through their review work, the FCA is concerned that unsuitable transfer advice has been, and is still being, given. 

"The FOI data reveals the Fos is upholding more cases in favour of the customer this year than last, which sends a clear message that the DB transfer market is very much under the eye of the regulator.” 

The FCA's survey of 3,015 firms between April 2015 and September 2018 concluded that too much of the advice on DB transfers it has seen was "still not of an acceptable standard".

The FCA is concerned that firms are recommending that large numbers of consumers transfer out of their DB pension schemes, despite its stance that transfers are likely to be unsuitable for most clients.

To clamp down on the issue the watchdog proposed in July to ban contingent charging in all but a few pension transfer scenarios.

This was to reduce concerns about a conflict of interest in situations where an adviser would only be paid if they recommended a transfer.

The regulator is also proposing the introduction of abridged advice, which is expected to feature an introductory chat with the client, where the adviser can get some high-level information about their circumstances and determine they are not a viable candidate for a transfer.

Mr Turner said: “The new measures being consulted on by the FCA will hopefully support the provision of independent, quality advice that consumers need. 

“In some cases, a transfer from a DB to DC scheme can be appropriate, but advice must reflect the specific circumstances of each individual.

“There is most certainly an important role for the adviser, and it would be a shame if regulatory changes lead to quality advice becoming harder to get.

"[I] expect this to remain an area of focus by consumers and regulators alike for some time.”

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