Monday, June 1, 2020

Pension Liberation Takes 5% Of Watchdog Complaints

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Pension liberation is still posing a problem for regulators and financial firms as complaints against blocked transfers are piling up with the Pensions Ombudsman.

Despite promising to give decisions on a number of complaints by March 31, no official determination has been forthcoming about the rights or wrongs of unlocking a pension early.

Now, the Pension Ombudsman has revealed 5% of all complaints are from retirement savers who have been refused access to their pensions with the help of liberation advisers.

A total of 84 complaints are before the ombudsman.

Most are from retirement savers who have had their transfers blocked by their pension providers on the grounds the switch was not an ‘authorised payment’ because the intention was to draw down the funds against pension rules.

Unclear law

The ombudsman also says all the complaints relate to personal pensions and not workplace schemes. A few are from retirement savers who had switched funds and now have no access to their cash.

“Some of the cases are multiple complaints are backed by pension advisors, which are exaggerating the figures,” said a spokesman.

“We expect to publish the results of our investigations sometime within the next few months.”

Many financial experts feel the ombudsman is stalling on making a ruling about pension liberation because the law is unclear on how providers should treat retirement savers under 55 years old who want to spend their pension cash.

The law states this is an unauthorised payment and imposes a tax penalty of at least 55% of the fund value on the amount transferred. However, accessing the money is not illegal providing the tax is paid.

Transfers held up

And that’s the root of the problem for pension providers, regulators and the ombudsman.

“Pension members argue they are doing nothing wrong, so it is unfair for their pension providers to delay their transfers,” said the ombudsman spokesman. “On the other hand, regulators, providers and trustees have a duty to protect the money of their members.

“Later in the year, the ombudsman will release some clear decisions, but meanwhile we need to examine each case in detail to come to the right conclusions.”

Pension providers are allowed to hold up a transfer for up to six months if they believe the switch is going towards an unauthorised payment.  HM Revenue & Customs (HMRC) and The Pension Regulator are reportedly pressurising pension firms to hold up transfers for longer which they suspect are pension liberation cases.

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