Yahoo Finance Pension customers struggling to access savings from 'inflexible' providers
One in six (17%) savers have been forced to transfer their pension pot to another company to effectively access their savings.
In a survey of 2,153 Which? members who accessed one or more of their pension pots in the last 24 months, long delays were a common theme, with one in four (25%) describing the process as slower than expected.
In one case, Debbie Byfleet was left nearly £3,000 ($3,393) out of pocket 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.
The National Grid scheme requested a payment for ‘admin fees’ months into the process, then asked her to cover her ex-husband’s share of fees. Delays by the National Grid scheme meant she was unable to withdraw any money for seven months.
Linda Hobbs, from North Yorkshire, attempted to withdraw money from her additional voluntary contribution pension held with Prudential, but it stalled because she has a building society current account which required the completion of a paper form and further identification checks.
Read more: Pensions: Workers not saving enough for retirement as cost of living crisis bites
She said: “My experience has been of a shambolic organisation with extremely poor customer service.”
A spokesperson for Prudential apologised to Linda for the delays and poor service she experienced. It also increased its compensation payment to her by £100.
The Pensions Regulator found that more than half (51%) of DC schemes continue to hold at least some member records non-electronically, with Which? warning that these “outdated providers keep industry in last century”.
Kevin Galton was unimpressed with the many hoops he had to jump through to access his small defined contribution pension. Galton originally held a pension with Friends Provident, which was later administered by Aviva.
Getting access to drawdown meant switching to an Aviva Sipp. This required lots of form filling, despite staying with the same company. Not all existing investments could be transferred and had to be converted into cash first – this took several phone calls to establish.
When trying to choose new investments online, Kevin was met with an IT issue. Taking a tax-free lump sum had apparently stopped the account balancing. This meant even more time on the phone. Kevin suspects that companies haven’t scaled up since the pension changes and their products haven’t been tested. He said: “A lot of these modern pension products are only just being drawn upon.”
A spokesperson for Aviva said: “We’re sorry Galton didn’t feel that withdrawing his pension from Aviva went as smoothly as he would have liked.”
Complaints about pensions have almost doubled since 2014-15. Of the 7,608 complaints received by the Financial Ombudsman Service (FOS) in 2021-22, many involve administration issues, poor customer service, or people being given wrong or incomplete information about a pension.
This is despite seven years on from the arrival of pension freedoms designed to usher in a new era of flexibility for those with defined contribution (DC) pensions.
Read more: Savers risk losing thousands with pensions that deliver poor value
The 2015 reforms were introduced to give savers more choice about what they can do with their retirement savings. They allow 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.
Sam Richardson, deputy editor of Which? Money, said: “Our pensions survey paints a picture of archaic providers that are rooted firmly in the last century and seemingly unwilling to modernise.
“The introduction of pensions dashboards could solve a lot of these problems for savers, so sections of the pensions industry must stop dragging their feet and let the government launch dashboards without delay.
“The regulator should also keep a close eye on pension providers to make sure their customer service is meeting improved standards.”
A new Consumer Duty is set to come into force in July 2023 for pension providers regulated by the Financial Conduct Authority, requiring 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.
Watch: When should I start paying into a pension?
