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Revealed: FOS complaints mount over pension freedoms


Frustrations over advice requirements and provider delays are dominating calls to the Financial Ombudsman Service in the opening months of the pension reforms, Money Marketing can reveal.

A Freedom of Information request submitted by Money Marketing shows the FOS has received 232 enquiries relating to the Government’s pension freedoms since they were introduced in April.

Almost all of the enquiries express dissatisfaction with the way providers are offering access to the freedoms.

Half of the enquiries relate to delays and poor service, with many consumers complaining forms have taken weeks to arrive and providers have repeatedly moved back the date their tax-free cash will be paid.

Some 13 per cent of the enquiries are from consumers who have been told by their provider they must take advice, but have been unable to find an adviser willing to help them.

One example, which has progressed to a formal complaint against Phoenix, states: “Phoenix said to the consumer to get an IFA to agree that they advised him to cash in on his pension. He spoke to 12 different IFAs who have said they will not advise him to do that.”

In addition, 8 per cent of the enquiries relate to annuities. Some are from consumers who are unhappy they have missed out on the freedoms by purchasing an annuity, while others are from customers complaining they cannot cash their annuity in.

As of 4 June, five of the enquiries had materialised into complaints. Of these, three were consumers complaining against the provider for requiring them to take financial advice.

Under Government rules, consumers with safeguarded benefits worth more than £30,000 must take regulated advice before accessing their pension.

But providers are taking different approaches, with some also requiring other customers to take advice, such as those entering drawdown.

As providers have come under fire for blocking access to the freedoms, in recent weeks the Personal Finance Society and Association of British Insurers have called for the advice requirements to be changed or scrapped.

Tip of the iceberg

PFS chief executive Keith Richards says the FOS enquiries are the “tip of the iceberg”.

He says: “The situation is likely to get progressively worse if changes to both process and liability are not updated in line with the freedoms and the public’s expectations. We are hearing of similar complaints via advisers, providers and Pension Wise, which is not surprising given the reforms were rushed in.

“I have every sympathy with some of these customers’ frustrations. This further highlights the conflict between the public’s interpretation of pension flexibilities, and an advice process that is intended to protect their interests but restricts them.”

FOS chief executive Caroline Wayman says the ombudsman will consider a number of factors when looking at these complaints.

She says: “We will look at what happened and what the obligations were on the firm, such as whether there was a Government requirement for the customer to take financial advice.

“Did the provider follow the rules that were in place, did they explain what they were doing clearly and did they treat the customer fairly? If not, we would look at what impact that had on the consumer.

“Enquiries will be a mixture of those who have already complained to the firm and those who have not. It will be interesting to see how many become complaints, as providers will have an opportunity to say ‘let me put that right for you’ or ‘let me explain why’.

“This is an area where providing explanations to consumers in clear, jargon-free language could head off complaints at the pass.”

On complaints about annuities, Wayman says the FOS would not apply rules retrospectively.

She says: “We would look at the rules as they were at the time. If you followed the rules and treated the customer fairly, you don’t need to worry.”


Others argue the problems reported by consumers show providers are struggling to communicate clearly and to deal with the volume of enquiries.

Daily Mail personal finance editor James Coney says: “Consumers were sold an idea that they would be able to use their pension like a bank account, but this promise has proved far from the truth. The Treasury may be to blame for that.

“But what hasn’t helped is that the reforms have just added to the jargon that already riddles this industry. So while insurers may not like ‘bank account’ as a term, do they really think ‘UFPLS’ and ‘flexi-access drawdown’ are easier to understand?

“On top of this, insurers are just not geared up for communicating with their customers – for many this is posing the greatest challenge of the pension freedoms. They don’t have enough call centre or admin staff, and those they do have can be poorly trained on the new rules.

“That’s why consumers are forced to wait so long for an answer, and in many cases given incorrect information.

“It doesn’t help that each insurer seems to be coming up with their own interpretation of the rules, which just adds to the confusion for consumers.”

The Financial Inclusion Centre director Mick McAteer adds: “I am not surprised people are frustrated when they have to go through certain processes to access their money given the hype in the media about how wonderful the freedoms are.

“When people are told they cannot access their money they are bound to be frustrated, and even though advice is there to protect them they will see it as yet another barrier created by the providers.”

Personal Touch sales and marketing director David Carrington says the regulatory restrictions around advice and guidance are causing further communication problems for providers.

He says: “Providers are in a tricky position as they are trying to give information without straying into advice. That creates a cautiousness which is likely to frustrate consumers.”


A spokeswoman for Legal & General says it is working through backlogs and delays.

She says: “Our process comprises three stages: an options pack, a decision pack and then payment and relevant paperwork.

“Our aim is to not put an excessive ‘process’ in place but we want to help make sure that customers are 100 per cent clear on the information they need when making such big decisions.

“This has led to some delays in both our customer service units and waiting times on the phones. We are rapidly responding to these backlogs and working through the issues as fast as we can, increasing resource to ensure we return as quickly as possible to our normal high customer service standards.”

Friends Life says customers have experienced delays. A spokeswoman says: “This has been caused by the older nature of our pension book, which often carry additional benefits, and the volume of calls we have received.”

Royal London says seven of its customers have taken pension freedom complaints to the FOS.

It says two of these complaints have been resolved and upheld in favour of Royal London: one where an annuity was already in payment and the customer did not understand they could not cash it in, and the second where a customer would not seek advice when they were informed it was a legal requirement.

Of the remaining five cases, four concern a legal requirement to take advice, and one where the customer is questioning the tax consequences of their request.

A Royal London spokeswoman says: “We are very concerned that there are many customers who do not understand the importance of advice, or the legal requirement to see an adviser where they have safeguarded benefits.

“This is why we called for a change in the current rules to allow people to go to Pension Wise rather than an adviser in this situation.”

An ABI spokesman says: “In the first month providers dealt with over one million enquiries so it would be unrealistic to think every enquiry will be dealt with as quickly as the provider and customer would like.”

Adviser views

Pete Matthew, managing director, Jacksons Wealth Management

Providers struggle to communicate clearly with consumers because they are concerned about compliance. The advice requirements are there to protect consumers but in many cases they get pound signs in their eyes and refuse to listen. It is a shame if that ends up in a complaint when nobody has done anything wrong.

Dennis Hall, managing director, Yellowtail Financial Planning

All providers have been trying to scale up their operations, but many will be taking on partially qualified staff. There are so many nuances to the reforms, such as the second line of defence rules, which have not been announced in a Budget speech or published in the Sun. That makes it very difficult for providers to explain the rules to consumers.

Chief executive Caroline Wayman on insistent clients and fear of the FOS

A year into her role as chief executive of the FOS, Caroline Wayman has heard plenty of misconceptions about the organisation.

The biggest myth among financial advisers? “That good advisers have anything to fear,” she says.

“Of course we see a whole range of advice from different firms, but if you’ve given good advice you have nothing to fear from the ombudsman. I want to understand where those concerns come from and highlight examples of good practice.

“We are human beings and I would urge advisers to come and talk to us if they have concerns.”

One area where the industry has been fearful of the FOS’ approach is insistent clients. Whether or not advisers should transact requests that go against their recommendations has divided the industry in recent months.

After repeated calls for regulatory clarity, the FCA published a factsheet on insistent clients in June.

Asked whether there is a need for further clarity from the FOS, Wayman says: “I thought the FCA’s factsheet was clear and would urge people to read that first.

“There aren’t special rules about insistent clients, and the more you think there is a special box of guidance for that, that may add to the concern rather than help.

“The FCA has done a good job of saying here’s some principles and that is their role – we are not the regulator.

“I don’t have any additional wisdom. As long as the advice is suitable, the customer is treated fairly, the information is clear and records are kept even if there is no transaction, you won’t go wrong with us.”

But Wayman says the FOS is open to sharing its work and may publish some case studies on insistent clients in future.

Another area where some have expressed concern about the FOS’ approach is suitability letters.

In November, the FCA said suitability letters are too focused on defending potential complaints and not enough on client engagement. But advisers argued they have to include certain information to defend any potential complaints to the FOS.

Wayman says: “We definitely agree with the FCA that suitability letters should be written for the consumer first. The main objective is to set out clearly, in ways the consumer can understand, what the recommendations are. Adding more and more information is likely to move you further away from that objective.

“If you start with doing right by the customer, giving good advice and setting it out clearly, you have very little reason to think that anybody is going to come along later and say that was wrong.

“Certainly I wouldn’t want people to be thinking ‘I need to throw that in, because the ombudsman might think x or y’.”

FOS cases

A sample of the pension freedom enquiries received by the FOS:

  • Complainant says a firm has  taken 20 days to send him paperwork for a lump-sum payment. The consumer has sent the paperwork and was told it would take 10 days for the funds to be released. However it is now saying the consumer needs to sign a risk warning and the consumer feels  the firm is stalling.
  • The customer asked to take money from their personal pension and were told they could not because they had an annuity. The customer said they did not know what an annuity was.
  • A complainant was advised incorrectly she would be eligible to cash in her pension. She subsequently discovered she could not do this as she is not 55 years of age.  She has organised home improvements and paid a deposit to builders.
  • A consumer is unable to cash in his pension pot without a signature from an IFA. He is struggling to get an IFA as most do not want get involved because of the liability.
  • A consumer wanted to take a lump sum from one of the pension policies he held with a firm. The business has combined the two policies into one. He feels the business is  using a loophole as combining the policies takes the value above £30,000 and means he has to get an adviser to sign a form to say he has received advice. This is proving difficult.



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There are 18 comments at the moment, we would love to hear your opinion too.

  1. Rt Hon Sir Arthur Streeb-Greebling 10th July 2015 at 9:13 am

    ‘Phoenix said to the consumer to get an IFA to agree that they advised him to cash in on his pension.’ Did the client ask the milkman? HE might tell him what he wants to hear.

  2. “Phoenix said to the consumer to get an IFA to agree that they advised him to cash in on his pension. He spoke to 12 different IFAs who have said they will not advise him to do that.”

    So 12 IFA’s told the him it wouldn’t be in interest to take the benefits under the new rules – didn’t he pick up the hint?

  3. Of course good advisers have something to fear. Smaller firms without permanent compliance departments will experience a diversion of valuable management time through having to attend to groundless complaints. This opportunity cost will only exacerbate scarce resource. Little wonder therefore that adviser altruism is increasingly becoming a thing of the past.

  4. The headline could read – Thickos complain. In guess the film Dumb and Dumber was too intellectual for some people.

  5. Easy answer. The government created the mess when the chancellor stood up and thought his sound bites made him look a hero. Well all they have to do is give a GOVERNMENTAL guarantee that if it turns out bad THEY will pick up the tab.

  6. Colin Caulfield 10th July 2015 at 9:48 am

    Of course IFAs have something to fear from the FOS – I have first hand experience of a complaint that should never have been technically considered let alone upheld but was only overturned at Ombudsman stage after a lot of cots and time. Quality in FOS is worrying !

    That is why RW letters are ‘complaint defence’ letters and not client engagement letters – they are to protect us from poor quality adjudicators as far as we can !

  7. It is easy to rush through legislation without any thought as to how it can be implemented at short notice, and without regard to the regulatory processes that are in place. The FOS should not hold providers or advisers responsible for a mess not of their own making.

    An interesting case turned up on my desk, an IFA tried to transfer his own DB scheme but was blocked by the provider, so I am being asked to sign it off before the CETV expires on 23 July. Very little time to do it, and very likely that he will not want to pay for a negative report. Not the first time that someone has come to me expecting miracles.

  8. Coney once again pushing the myth that the industry created UFPLS and FAD, and also completely ignoring the role he and the rest of the mainstream media have played in creating the gap between customer perception and reality.

    FOS have already reviewed many Pension Freedom type complaints since April 2014, such as cashing in annuities already purchased. The vast majority of these have been rejected, and in all likelihood most of the new Pension Freedom complaints will have a similar outcome.

    Wayman misses the point on Insistent Clients when she refers to “as long as the advice is suitable”. The point is that the advice in these cases isn’t suitable, but the client wants to proceed regardless.

  9. The spirit of the legislation is to give people access to their own money instead of continuing to sanction institutional theft. The obstacles being set up by regulators, providers and IFAs are against the spirit of the legislation.

  10. Archibald Aitken 10th July 2015 at 3:44 pm

    Ken, the obstacles set up by IFAs are to protect the IFAs business when clients who have made a bad decision are looking for a scapegoat in 5 years time. The as usual the FOS decides that the IFA is guilty no matter what the circumstances are. Until consumers are given the same responsibility as the IFA these types of situations will always be there.

  11. Get off your soapbox Ken, IFAs do not make the rules, we have to try to work out what they mean in terms of liability to us. That is not setting up obstacles, just being practical. I suspect you do not work at the coal face and have a different perspective to those of us who do.

    You refer to the spirit of the regulation, well it is in direct conflict with the regulatory processes so I suggest you criticise the legislators for not doing their job properly. I do not intend to put my head in the noose because the Chancellor wishes to make a tax grab, whichever party he represents.

  12. Well said Geoff. I wonder if Ken just likes pandering to the intellectually challenged.

  13. Can’t get my way? I’ll complain to the FOS. IFAS were probably telling him they wouldn’t advise him to do that because, in their professional opinion, it was an unwise course of action.

    These people are probably the sort who, if they asked their GP for a prescription for some Heroin, would complain to the GMC when the GP says ‘sorry, can’t do that’.

  14. Anthony Stevens 12th July 2015 at 11:22 am

    Client’s by and large simply don’t understand or agree with the “duty of care” responsibilities – and largely their tendency to want to commit financial suicide is precisely why they are there!
    Personally i would prefer exe only advice to be a seperate structure entirely – i.e. a firm can only give full advice or exe only – and never the twain shall meet. It would provide some clarity for consumers, advisers and PI providers plus allow for referrals back and forth. It would also eliminate the “bad eggs” that package bad advice as exe only for a profit and have ruined the process for everyone else.But thats just my tuppenceworth.

  15. It is interesting to see the insurance companies behaving this way to protect the people from themselves but what about all the years they let people buy poor annuities rather than insist they go open market or take advice!

  16. Iirc, the OMO has existed for years.

    Customer’s chose not to take this route, taking an annuity from the provider was the easy option.

  17. As usual it appears that most of the misunderstanding by consumers is by those that do not use the services of an IFA regularly and rely solely on the headlines provided by the media. When the media become regulated like us, for their headlines and stories, they might think twice about sensationalising announcements by government and misleading members of the public.

  18. I agree with Mick McAteer hype in the media about freedom and choice is the main cause of the identified consumer problems. That and the Government lie that they trust consumers with their own pension pots.

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