First Actuarial is calling for a fairer approach from the Financial Ombudsman Service (FOS) as pension redress remains at a historic low, urging a reassessment of pension transfer complaints in light of current market conditions.
The firm points out that the high uphold rate for Defined Benefit (DB) pension complaints assumes that consumers are always harmed by transferring out of guaranteed pensions, but in many cases, people may be better off after transferring, raising questions about the fairness of declining redress payments.
The government’s push to ease regulatory burdens could provide a good opportunity to update the redress system, with Rachel Reeves highlighting redress as a barrier to investment and promising to overhaul how both the FOS and FCA handle complaints in her first Mansion House speech.
The firm argues that regulators should take a more flexible approach and that the reform is key to ensuring fairness in pension transfer cases.
First Actuarial head of redress services Sarah Abraham says: “Redress is important because there will always be genuine cases where people’s lives have been decimated by poor pensions advice. But working on the basis that the consumer is always worse off after transferring out of a Defined Benefit scheme is unhelpful.
“Our most recent update to the First Actuarial Redress Tracker shows that the likely redress on a book of Defined Benefit transfer advice remains below 5 per cent of the total transfer value, even allowing for the recent volatility of some asset classes. This is a sharp decrease from only four years ago, when redress was typically around 40 per cent of transfer value.”
“In my mind, that means making the FOS more business-friendly and upholding cases only where consumer have genuinely been poorly advised. And it means reconsidering the relative value of DB and Defined Contribution pensions in light of current market conditions rather than those of several years ago.
“The FCA’s starting point is that most consumers are best advised to stay in a DB scheme. This in turn drives FOS decision-making, which is too simplistic and fails to consider movements in redress payments and the value that consumers place on pension flexibility. It’s important to look at the big picture.”
