Pension transfer complaints on the rise

Problems with pension transfers are becoming more common, and accounted for one in five complaints received by the Pensions Ombudsman in the last financial year.

A significant number of complaints were linked to the transfer of defined benefit (DB) money into a defined contribution (DC) schemes, but delayed transfers were also a significant problem for pension savers and their advisers.

Overall, the ombudsman received 1,196 complaints against pension funds in 2008/09, up slightly from last year, with 240 complaints concerning pension transfers.

The proportion of transfer complaints has almost doubled from 11% in 2007/08, though the ombudsman says 88% of cases are related to transfers from DB schemes to DC schemes.

In many cases the complaints were not upheld, as they related to scheme members expecting more cash from their DB scheme than could reasonably be expected.

However, the Pensions Ombudsman did uphold a number of cases where scheme took too long to transfer client monies to a new provider.

In one case, despite persistent requests from an IFA, a pension scheme failed to provide a transfer quotation for five months.

Eventually, the client was able to obtain a back-dated quotation, as well as money to pay the additional costs incurred by his adviser as a result of the delay.

Tony King, Pensions Ombudsman, says the year has been largely uneventful, but is not ruling out a spike in complaints as the economic turmoil filters through to pension funds and their members.

"Falling values or weaker solvency levels are not, on their own, subjects for complaint to my office," he says.

"That said, there may be consequences for complaint numbers in future years. It is possible that, as with Warren Buffett's naked swimmers - visible when the tide goes out - declining markets may expose administrative problems that would not otherwise have been seen.

"Regulation is designed to limit the risk of such failures on the larger scale but, to the extent that potential sources of complaint lurk under the water, it may be some time before they are apparent."