Out-Law Analysis | 04 Nov 2015 | 3:47 pm | 2 min. read
Both the Pensions Ombudsman (84-page / 628KB PDF) and the Pensions Advisory Service (TPAS) (26-page / 1.17MB PDF) highlighted increased complaints as one of the biggest issues that their teams will face over the coming year in their annual reports for 2014/15, while the Financial Conduct Authority (FCA) recently reported a 20% increase in complaints in relation to 'decumulation, life and pensions' - the first figures to reflect the new pensions world after the changes of 6 April 2015.
But although more complaints are inevitable as members learn more about their rights within pension schemes and their ability to draw down lump sums, it would be wrong to assume that complaints have increased merely as a result of recent policy changes. With some small changes to their risk management practices and better communication with scheme members, trustees and providers can easily avoid some of the most common pitfalls.
Factors within provider control
The Pensions Ombudsman, which deals with complaints from pension scheme members once they have reached the end of the scheme's own complaints process, reported a 21% increase in the number of enquiries it received and a 22% increase in expected cases in financial year 2014/15. TPAS, which provides free and impartial guidance to workplace and personal pension scheme members, received a 27% increase in enquiries.
Referring a complaint to the Pensions Ombudsman does not necessarily mean that it will be taken up, and the increase in TPAS enquiries does not necessarily correlate with complaints. But the figures all highlight an upward trend, and one which shows no sign of abating given early figures in relation to the new financial year. At the same time, legal rights were the fourth most popular call topic recorded by TPAS, with many of the complaints centred on mistakes, delay and decision-making.
In the annual report's opening statement, new Ombudsman Anthony Arter said that the "steady increase in complaints" would continue into the coming year with increased public awareness, automatic enrolment and the new pension flexibility all contributing. The Pensions Ombudsman took on 21% more investigations this year, of which 38% were upheld at least in part.
Interestingly, the most common causes of discontent among pension scheme members reported by the Ombudsman involved missing, late or incorrect benefits; misquotations or misinformation; or failures to provide information or act on instructions. The number of these complaints is surprising as trustees and providers have a great deal of control in these areas. As long as protocols are in place, and the pension scheme is advised by experienced individuals, many of these complaints could be avoidable.
However, the new pension flexibilities are clearly having an impact too. The FCA recorded 73,055 'decumulation, life and pensions' complaints during the first six months of 2015 - an almost 20% increase on those received in the second half of 2014. Within this, the number of complaints about income drawdown rose by almost 90%. Although the FCA does not record the reasons for complaints, the regulator has criticised the way the pension freedom agenda has been handled and in particular the trend of encouraging scheme members to seek expensive legal advice.
Action for trustees and providers
With a new pension regime will come new challenges for both trustees and providers, but mistakes and delay are areas which are easy to address.
Trustees and providers should re-evaluate their current strategies and ensure the best possible risk assessments are in place to avoid exposing themselves to potential litigation. Arguably, the best way to avoid complaints is to be better informed and have the best practices in place. An experienced legal team, that understand the common areas where mistakes are made and can assist with risk assessment strategies, can help here.
Finally, good communication with members is vital to limit complaints, and to resolve those that do arise in a timely manner.
Hayley Goldstone is a pensions litigation expert at Pinsent Masons, the law firm behind Out-Law.com.