Earlier this year, providers including Axa and Scottish Widows, imposed withdrawal restrictions on their commercial property funds and these are still in place.
Most pension providers allow the transfer of the part of the pension portfolio which is not invested in these property funds to another life office, but Scottish Widows will not allow it on any contract while Axa will only allow it on certain contracts.
Hargreaves Lansdown head of pensions research Tom McPhail says: “This is so typical of life offices. I do not recall ever seeing this kind of warning on pension arrangements which is why I am so shocked by the whole thing.”
CBK principal Peter Chadborn says he would be put off from recommending both providers to pension clients in the future and says this is not treating customers fairly.
Scottish Widows says it does not have the facility to allow partial transfers while Axa says that different contracts have differing terms and conditions and therefore will not always allow partial transfers.
In other news, providers are calling for variable annuities to be renamed to prevent consumer confusion.
Canada Life wealth management technical support manager Bernard Footitt says describing these products as variable annuities is misleading because they are not annuities.
He says: “It is confusing and misleading for consumers. they should be called guaranteed drawdown products because that is what they are.”
Prudential head of retirement income Aston Goodey says he thinks that life offices will want to phase out the name because it has too many connotations with being complicated and expensive.
Both providers say they are looking at developing a guaranteed product although Footitt says that Canada Life may look away from the retirement space and more to the unit-linked bond market.
Administration system problems have hit Norwich Union which has suspended the transfer of 104,000 pension policies, (not 380,000 as originally stated by the life office. Presumably another systems failure led to the incorrect calculation of the number of policies affected).
NU says the updating of its computer systems meant that it was unable to quote transfer values, maturity values and final bonus figures, although it can provide a unit fund value.
The life office says 85 per cent of the policies have had the suspension lifted but 15 per cent are still on hold and no restoration date has been given.
And finally, Royal London head of communications Alasdair Buchanan is warning advisers must address a lack of consumer understanding over balanced managed funds and their high level of equity exposure.
He says 80 per cent of company pension schemes have a balanced managed fund as their default option and that on average, 80 per cent of these funds are invested in equities, 20 per cent in fixed interest and around 1 per cent in property.
He says: “Individuals will be sitting there thinking their fund is safe. The asset split does not really reflect their understanding of a balanced managed fund. They are going to give grief to someone. The volatile market means that this is becoming more of an issue. There is a serious risk here for advisers, employers, the trustees and providers.”
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