Consumer trust in the pensions industry is on the wane, according to the latest results of an annual survey conducted by pensions administrator Trafalgar House and published last week.
No surprises there, I say. Indeed, I’m amazed trust could fall any lower. Currently, the industry’s love of jargon makes most pension documents impenetrable to all bar actuaries and astrophysicists.
As Trafalgar’s Daniel Taylor says: ‘People tend not to trust what they don’t fully understand – and, for many, pensions remain a distant and complex concept.’ Spot on.
Constant Government meddling doesn’t engender trust either. In recent years, changes to the rules governing contributions, tax relief and inherited pensions have made these retirement vehicles as baffling as solving the Rubik’s Cube.
And given the parlous state of the country’s finances, I wouldn’t be surprised if Rachel from Accounts added to this complexity in her Autumn Budget on October 30 with a clampdown on the right to access tax-free cash. A ‘right old bugger’s muddle’ as my late mother would have said.
Providers and administrators (the Trafalgars of this parish) don’t help matters either by taking an age to act on customers’ instructions and on occasion making a right mess of things.
The pension industry’s love of jargon makes most documents impenetrable to all bar actuaries and astrophysicists, writes JEFF PRESTRIDGE
One big current spanner in the works is the inordinate amount of time it takes many people to transfer their pensions, maybe to get a better deal (lower charges), or to consolidate an array of plans built over a lifetime of work into one convenient pot.
It’s an issue I wrote about two months ago – and I return to it today on the back of a campaign just launched by newish provider PensionBee which calls for the introduction of a ten-day pension switching guarantee, underpinned by supporting legislation.
Those in breach of such a guarantee, it adds, should face financial penalties for non-compliance.
Such a switching guarantee has existed in the current account market (seven days rather than ten) for the past 11 years – and has enabled 11 million people to switch banks without experiencing tortuous and disruptive delays. It has been an unmitigated success story.
The switching guarantee that PensionBee is calling for would only apply to defined-contribution pensions which most private sector workers now pay into. Transfers from defined-benefit pension plans rarely make sense and are now subject to strict regulatory rules to protect consumers.
To support the campaign, PensionBee, in conjunction with financial services consultant the Lang Cat, has issued research showing that 27 out of 163 financial advisers have on occasion waited more than a year to effect a transfer on behalf of a client.
Reinforcing Trafalgar’s point on diminution of trust, four out of every five advisers surveyed said tardy transfers damaged consumer confidence in the pensions industry.
Retired lawyer Jayne Adams, 62, was ‘unsettled’ by the complexity of arranging her pension
Last week, I spoke to retired lawyer Jayne Adams who believes it is high time for a switching guarantee to be introduced.
In February last year, Jayne, a 62-year-old retired lawyer from Hurst Green in Surrey, put in train the transfer of an old works pension as part of consolidating an array of pension pots assembled over her working life.
She received the transfer documents from the pension scheme administrator and returned them by post (no online option was given).
She was then asked to send the same forms on two other occasions. When she queried why, no explanation was given.
In April, she was asked to complete yet more forms and warned that the scheme’s trustees would assess whether she had a ‘right to transfer under pension law’.
She was also asked to send a copy of her passport, signed (certified) by a solicitor.
‘It unsettled me,’ says Jayne. ‘I was also told the forms had to be completed promptly, otherwise the transfer would not proceed.’
The funds from the transfer (a five-figure sum) eventually landed with PensionBee in early June. A request for the return of the certified copy of her passport has not yet been met.
‘I’m all for a pension switching guarantee,’ says Jayne. ‘Of course, pension companies need to check you are not being scammed by moving your fund into the hands of a fraudster.
‘But when you are moving money to a well-established provider, it shouldn’t be a lengthy transfer process.’
On Friday, Lisa Picardo, chief business officer at PensionBee, told me: ‘Lengthy transfer delays are not just inconvenient, they’re unacceptable.
‘They undermine trust and cause real stress for consumers who are simply trying to take control of their hard-earned retirement savings.’
In the coming months, the company will crank up its campaigning, publishing research into consumer expectations around pension transfers – and launching a consumer petition.
It will culminate in an open letter to the Government, supported by like-minded providers, calling for a ten-day switching guarantee.
It’s a campaign I back and if successful would help restore a little bit of trust in pensions – currently the play toys of actuaries, administrators, and hard-up governments.
Given a report last week from the Financial Conduct Authority recommended that people consolidate their pension pots as part of getting their finances in better order, it shouldn’t meet with regulatory resistance.
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