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MM leader: Pension freedoms are failing consumers

Natalie Holt website

Since the rollout of pension freedoms in April, there has been a watching brief on whether the reforms have been a success or not. There has been anecdotal evidence of the types of queries providers and advisers are seeing, and how consumers are reacting to this new found access to their pension pots.

What has been harder to come by is robust statistics on whether pension freedoms are working for consumers. Indeed, Money Marketing revealed only this week that our attempts to find out more about consumers’ experience of Pension Wise were blocked by the Treasury because publishing does not suit its timetable.

What we have been able to ascertain, however, is the extent to which the public are struggling with the reforms. Through a Freedom of Information request to the Financial Ombudsman Service, Money Marketing deputy head of news Tessa Norman has comprehensively pieced together what is happening on the ground – and it does not paint a pretty picture.

The data reveals that of the 232 enquiries received by the FOS related to pension freedoms, half concern delays and poor service.

Wading through the data, there are two emerging themes: firstly, consumers are frustrated that what they thought would be an easy process to access their money is proving to be anything but. The second, and more worrying trend, is that the level of discontent is unsurprising, and worse, almost to be expected.

The tight timescale the industry had to work to deliver the reforms is well documented. But over three months later, that excuse is now beginning to wear thin. Providers need to grasp the nettle here and at the very least ensure that any and all customer communications on pension access are clear and accurate, to avoid a deluge of complaints later on.

The insistent clients issue also rears its ugly head. Advisers are well versed in the nuances of this controversial topic, but all consumers see is an obstruction to getting their cash; through the advice requirement itself, and then their inability to find someone who is prepared to help them.

Unfortunately, this snapshot is a stark revelation of the extent to which pension freedoms are failing consumers. The individual who wanted to cash in their pension and was told they had an annuity, only to respond they did not know what an annuity was, is a case in point about the need to improve a system where people are grappling with retirement income for the first time.

Natalie Holt is editor of Money Marketing

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. Archibald Aitken 10th July 2015 at 3:54 pm

    Natalie, this is a difficult and complex topic but your headline and story are like something from the Daily Mail. Due to the fact that advisers are terrified of being caught up in another one size fits all smear campaign against the industry they are simply refusing to deal with clients who want to access all of their pension funds. Why do they take this view? Well history shows us that no matter how much information you provide a client with and no matter how many times you can state that its not in the clients best interest any insistent client is likely to come back to haunt you. Subsequently PI fees are huge, FCA fees have just increased by more than 125%. Then we have FOS. The less said the better.

  2. Julian Stevens 13th July 2015 at 9:53 am

    The single biggest part of the problem seems to be fear of retribution, supported by the regulatory powers that be, on the part of providers if they allow policyholders to encash their pension policies without proof of having taken advice. Should the policyholder later complain, the providers can absolve themselves of blame on the grounds that they simply facilitated an advised course of action. Refer to your financial adviser Mr Complainant, they’re the culpable party.

    The second biggest part of the problem is that intermediaries aren’t prepared to provide that advice for fear of retribution if the policyholder goes against it, then later complains against them for having facilitated a detrimental course of action. The FOS disregards adviser-designed disclaimers and even one hand-written by the client is unlikely to be fire-proof. “Mr X (the adviser) dictated the letter for me, he said it was just a formality, I didn’t really understand what I was doing, he led me astray.” What adviser in his right mind would bet that the FOS won’t find in favour of the complainant?

    The whole business is a farce anyway because the providers don’t seek to establish just what the advice actually was. Even if they did, what would they do if the advice was not to encash (as, in the great majority of cases, it probably will be)? Block it? Then what? The policyholder will probably complain that he’s been forced to pay for advice he didn’t want and that, because that advice was contrary to his desired and legally rightful course of action, he’s no nearer to being able to do what the government announced he would be able to do after 5th April 2015.

    And where is the FCA in all this? Certainly not, as far as I’m aware, doing anything to free up the log-jam. Why not facilitate a straightforward procedure whereby anyone seeking to encash their pension policy/ies is issued with a single page, straightforward list of 10 points they ought to consider before proceeding further? If they sign that to confirm that they’ve read and understood all 10 points but wish to proceed anyway, that should be the end of it and they will have no one but themselves to blame should they regret their decision at a later date. Simple. The obstacle to such a solution, as is so often the case, is that the FCA doesn’t do simple.

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