Pension Freedom grumblings


Pension Freedom grumblings

The Daily Mail published an article on the 25th May about the complaints linked to Pension Freedoms made to the Financial Ombudsman. (See the original article here).

The Mail quotes 475 complaints relating to Pension Freedoms, with 365 resolved and 25% upheld for the period between April 2015 and the end of March 2016. Typical grounds for complaint include:

Administration; wrong forms sent out or forms getting lost

Exit Fees; charges levied to move money to another provider or take early retirement.

Delays; hold ups to accessing money, paying out lump sums and issuing paperwork.

Misinformation; incorrect information being supplied, for example the provision of a flexi-drawdown plan, when the provider actually cannot offer one.

Unwanted, compulsory financial advice; for over £30,000 fund amounts, with or without guarantees.

As advisers we see a lot of these annoyances on a regular basis and we will try to ensure that the client has a clear idea of how long things will take and we will check their understanding of the information given. It is not unknown for a provider to take 25 working days, (5 actual weeks), just to provide a response to an enquiry letter, so it can easily be three months from initial contact to an agreed conclusion.

It is also not uncommon for call centre staff to be unaware of the products offered by the provider they work for, to not know the likely timescales for things to be done and to have little idea of the tax implication of taking a whole pension fund as cash.

As an adviser it is very hard for me to argue that pension advice is necessary without any right thinking person saying “he would say that, wouldn’t he!”, but I would suggest that retirement is too important to be done badly.

Most people are unfamiliar with the finer details of pension products and how they interact with taxation, so the likelihood of them getting the best outcome without some professional advice, I would suggest is small.  The Citizen’s Advice Bureau did a survey of the soon-to–be-retired and concluded that most of them had a misplaced belief in their technical competence and their ability to spot a fraud. Ten years of being a financial adviser suggests that the CAB have a point!

The Pension Freedoms have only been around for just over a year, so there has to be some bedding in. The complaints covered in the Daily Mail are mere annoyances compared to what we may expect in the future. The more sophisticated frauds will not be detected for some time to come, when people transition from accumulation to drawing a pension. Experience in the USA and Australia suggest that complaints in the future will include running out of money, long before death, relatives complaining that there is nothing left in an estate to inherit and complaints that they should have bought an annuity rather than using drawdown.

Many things in life go in fashionable circles, like skirt lengths, beards or hair styles, so I would expect that the annuity will rise again as the default pension income choice for the man in the street. They may not be exciting, but they provide sustainable income for as long as you remain alive.

If you would like to know more about how we can help you plan and realise your financial goals then contact us at info@martin-redmanpartners.co.uk or call us on 01223 792 196.

The information contained is for guidance only and does not constitute financial advice. It is based on our understanding of UK legislation, whether proposed or in force, and market practice at the time of writing. Levels, bases and reliefs from taxation may be subject to change. Accordingly, no responsibility can be assumed by Martin-Redman Partners its officers or employees, for any loss in connection with the content hereof and any such action or inaction.