Pension savers ‘frustrated’ by ‘outdated providers’
New research from the consumer champion claims that “inflexible” pension providers are creating problems for savers, seven years on from the introduction of pension freedoms designed to make pensions more flexible.
The 2015 reforms were introduced to give savers more choice about what they can do with their retirement savings. They allow defined contribution (DC) pension holders to buy an annuity (previously the default), keep their money invested and take an income (drawdown), or take the whole pot as a lump sum.
But in a survey of 2,153 Which? members who accessed one or more of their pension pots in the past 24 months, Which? found one in six (17%) had to transfer their pot to another company to achieve their preferred method of access.
Long delays were a common theme, with one in four (25%) describing the process as slower than expected.
One Which? member was left nearly £3,000 out of pocket, due to admin fees, after she waited months to get hold of pension funds she was owed from National Grid and Aviva, following a pension sharing order as part of a divorce settlement. Delays by the National Grid scheme meant she was unable to withdraw any money for seven months.
Somewhat surprising in the digital age, in June The Pensions Regulator found that more than half (51%) of DC schemes continue to hold at least some member records non-electronically.
Pension complaints skyrocket
Which?’s findings echo Financial Ombudsman Service (FOS) figures, showing complaints about pensions have almost doubled since 2014-15.
Of the 7,608 complaints received by the FOS in 2021-22, many involve administration issues, poor customer service, or people being given wrong or incomplete information about a pension.
A new “Consumer Duty” is set to come into force in July 2023 for pension providers regulated by the Financial Conduct Authority. It will require companies to give helpful and accessible customer support, and to make it as easy to switch or cancel products as it was to take them out in the first place.
Which? says the regulator should keep a close eye on pension providers to make sure they are meeting these requirements now.
Which? says that to help pension holders navigate the pension market, providers need to have all of their information, including their State Pension, in one place.
It says that with employees working more jobs in their careers than previous generations and having extra pots to keep track of, and with the threat of millions of pounds being lost to dormant or unlocated pensions, the need for the pensions dashboard is as important as ever.