The Financial Ombudsman Service has published its latest complaints data and there is some useful information about complaints related to defined benefit transfers and its attitude towards them.
In 2022/2023, complaints related to DB transfers (not to a self-invested personal pension) had an uphold rate of 58 per cent.
However the uphold rate the previous year 2021/2022 was 52 per cent; in 2020-2021 it was 50 per cent; and going back to 2019/2020 the uphold rate was just 42 per cent.
The trend is easy to spot, with the proportion of complaints being upheld increasing steadily year-on-year.
Increasing number of complaints
The other interesting bit of reading from the stats is the number of complaints resolved by the Fos.
In 2019/2020, they had to resolve a mere 64 complaints relating to occupational pension transfers.
The following year (2020-2021) this had increased to 164 and by 2022/2023 this has increased to 399 resolved complaints (category ‘DB transfer – not to a Sipp’).
However, the startling fact is that Fos stats show that there were actually 1,425 new complaint cases related to DB transfers in 2022/2023 and a further 88 related to section 32s.
Of course, this reflects a situation where the number of transfers increased substantially, commensurate with the general increase in cash equivalent transfer values over the period in question.
However, this dramatic increase has also been prompted by a surge in generalised phishing complaints made by complaints management companies, switching their attention away from the now-closed payment protection insurance mis-selling market.
Mitigating the risks for all parties
But given this scenario, if you are one of the few IFAs still prepared to help members of such schemes, this should be yet another reason to give you pause for thought.
If you still consider that including DB advice is a worthwhile part of your advice offering – bearing in mind that for a limited number of clients a transfer can be literally life-changing – then the data should certainly prompt a re-examination of your approach to advice.
After all, in the present climate and with the ever-present danger of very large redress payments, there is nothing wrong with mitigating the dangers of future complaints.
Of course, ensuring best practice is always applied will only benefit your clients and your business as well.
With this in mind, the following key points within this heavily regulated and complex area could provide a starting point for a review of your advice processes.
The objective of objectives
Firstly, the simple stuff: know your client (KYC).
The client's objectives should be detailed and highly personalised. While most objectives will fit into the categories of ‘flexibility, control and death benefits’, a much greater level of depth is necessary.
Where multiple objectives form part of the client’s overall plans, it should be clear which are ‘needs’ and which are ‘wants’, as assessing the relative importance of these will become a vital part of the appropriate pension transfer analysis stage later on.
