Complaints about personal pensions and income drawdown rocketed in the first six months of 2015, suggesting thousands of people have encountered problems accessing their retirement cash in the wake of the new freedoms.
The Financial Conduct Authority data is the first to be published that includes the period immediately after 6 April, dubbed pension freedom day, when new rules took effect allowing many people to cash in some or all of their retirement pot.
The FCA said complaints relating to “decumulation, life and pensions” totalled 73,055 during the period 1 January to 30 June this year, up 19.7% on the second half of 2014.
However, within this, complaints about income drawdown – by which an individual takes a regular income from his or her pension pot each year – leapt by 87.8% to 1,341, compared with 714 during the previous six months.
Meanwhile, complaints about personal pension plans and so-called free-standing additional voluntary contributions – a type of private top-up pension plan sold as an add-on to a workplace retirement scheme – jumped by 51.9% to 35,769. And those relating to investment linked annuities – by which older people receive a guaranteed minimum income with the chance of a top-up if markets rise – were up 21% to 791.
The FCA does not collect information on why people are complaining, but this surge in the number of unhappy customers comes in the wake of mounting criticism about the way firms are handling the pension freedoms, which allow anyone over the age of 55 to access some or all of the money rather than being compelled to buy an annuity.
Some companies have barred people from accessing their money, others have insisted people pay for expensive financial advice, and many have imposed hefty charges for people to access their cash.
In July, consumer body Which? said financial firms were charging as much as £270 a time to allow people access to their own money, and added that those entering income drawdown, the option taken by the majority of those who do not want to cash in all their pension pot, can be charged as much as £26,000 in fees over a decade with the most expensive provider.
Overall, financial services firms received 2,138,209 new complaints during the first half of this year. The FCA said that overall, complaints were down by 2.1% compared to the previous six months, driven by the fall in reported problems involving payment protection insurance.
The top five most complained about firms, in terms of the number of complaints received between 1 January and 30 June, were Barclays Bank (283,221 complaints, up 2.4%); Lloyds Bank (232,971, down 4%); Bank of Scotland (190,121, down 18%); NatWest (144,741, up 14.4%); and HSBC (140,244, down 7.8%).
