Personal pensions are a useful and tax efficient way for people to save for retirement. But when problems arise with the arrangements, the effects on consumers - and their retirement planning - can be significant and long-lasting.
This note explains the sorts of things we consider when we're asked to look into a complaint.
Types of complaints we see
We get complaints from consumers who tell us about these types of issues, and say that a business has:
- recommended an unsuitable pension arrangement for their circumstances and objectives
- recommended a pension arrangement that they didn't meet the eligibility criteria for
- shouldn't have advised them to contract out of the State Earnings Related Pension Scheme (SERPS) through a personal pension
- unsuitably advised them to start an income-drawdown arrangement rather than buy an annuity
- chose inappropriate investment funds, given their attitude to investment risk
- took too long starting income or annuity payments, or made payments on the wrong basis
- made other types of administration errors
We can consider most complaints about personal pension arrangements, but in cases where a consumer's complaint doesn't fall under our jurisdiction, we'll tell the consumer about other organisations who may be able to help.
What we look at
For complaints about advice on taking out a personal pension arrangement, we'll look at what advice you gave the consumer and whether it was suitable for them.
We'll take into account all the relevant circumstances, including:
- the suitability of the pension arrangement you recommended, taking into account the consumer's personal circumstances and aims
- the suitability of the underlying investments in the pension arrangement, based on the consumer's attitude to investment risk - and their capacity to take that risk
Find out more about assessing the suitability of investments.
For complaints about the administration of a personal pension arrangement, we'll consider what happened, what should have happened and whether the consumer has lost out because of it.
Handling a complaint like this
Your customer will need to submit a complaint to you first, so that you have the chance to put things right. If your customer complains to you, and you don't respond within the time limits or they disagree with the decision you've come to, they can come to us.
Find out more about how to resolve a complaint.
Putting things right
If we uphold a consumer’s complaint, we’ll tell you what you need to do to put things right.
If we decide a consumer has been in the wrong type of pension arrangement, we’ll look at the position they should have been in, if they hadn't been given the wrong advice – and if they’ve suffered a financial loss, we might tell you to make up the difference in the existing arrangement. Or if that’s not possible, we might tell you to make a payment to the consumer directly.
Similarly, if we think the investments in the pension are unsuitable, we might tell you to make up the pension to the value it would have been with the right sort of investments. If we don’t know the exact investment in which the consumer would otherwise have been, we might use an index, fixed rate bond returns, the Bank of England base rate – or a combination of these - to arrive at a return we think would have been likely to be achieved.
If there have been administration errors, we’ll look at the individual circumstances and the impact they’ve had. Errors resulting in delays in pension payments might be redressed by a total of the missed payments plus interest to the date of settlement. If documents have been sent to a wrong address, or originals have been mislaid, we might make an award for the inconvenience this has caused, or to cover the cost of replacing the originals.
Consumer complains investment funds within a personal pension plan represented too high a risk
Consumer complains that a business' delay in processing paperwork caused her annuity to start late
Consumer complains about advice to contract out of SERPS
Businesses and consumer advisers can contact our technical desk on 020 7964 1400 for general information on how the ombudsman might look at a particular complaint, or for guidance on our rules and how we work. Or you can search our database of published ombudsman's decisions.
Our work gives us an insight into how complaints arise and how they might be avoided in the future. Find out more about the ways we share our knowledge and experience.