Surge in final salary pension transfer complaints
The Financial Ombudsman Service (FOS) received 798 complaints during the 2018/19 financial year compared to 553 the previous year.
It upheld 39 per cent of cases in favour of the customer in 2018/19, up from 30 per cent, according to figures obtained by consultancy firm Duff & Phelps under a Freedom of Information request.
An estimated half a million people have cashed in their final salary or defined benefit (DB) pension in exchange for a lump sum transfer into a defined contribution (DC) arrangement since ‘pension freedom’ rules were introduced in 2015.
Such transfers have become a controversial topic because in most cases, they are not in the best interest of the saver as they involve people giving up a guaranteed pension income in retirement.
Anyone with a DB pension valued at £30,000 or above must take advice from a regulated financial adviser before they can transfer.
However, the Financial Conduct Authority (FCA) said earlier this year it was “deeply concerned” by the number of savers who are told by advisers to ditch their ‘gold plated’ final salary pensions.
The regulator said it plans to ban a controversial charging model – known as contingent charging – which means advisers only get paid for recommending a client transfers their pension.
Mark Turner, a managing director at Duff & Phelps, said: “Since the introduction of pension freedoms, some 69 per cent of individuals were advised to transfer out of their DB pension, according to FCA data.
“The FCA is concerned that unsuitable transfer advice has been, and is still being, given.
“The FOI data reveals the FOS is upholding more cases in favour of the customer this year than last, which sends a clear message that the DB transfer market is very much under the eye of the regulator.”
For more, see: Five reasons to transfer your DB pension (and five not to)