Pension holders left frustrated by delays and mistakes

Poor service and the antiquated systems of major pension providers are leaving customers struggling to access their savings.

It's been seven years since the arrival of the pension freedoms reforms, which were designed to usher in a new era of flexibility for those with defined contribution (DC) pensions. 

But some retirees have found themselves anything but free, because of their pension providers.

Our June 2022 survey of Which? members reveals that people are facing limited choice of products, long delays and poor service when trying to get their money.

Here we explain what the pension freedoms were, why pension firms need to do more, and what your options are at retirement.

What were the pension freedoms?

Prior to the pension freedoms, most people purchased an annuity to provide an income during their retirement.

The pension freedoms allowed DC pension holders to buy an annuity, keep their money invested and take an income (via pension drawdown), or take the whole or part of the pot as a lump sum.

If, that is, your pension provider offers all these options.

But in a survey of 2,153 Which? members who accessed one or more of their pension pots in the last 24 months, we found one in six had to move their pension to another company to access their money in the way they wanted.

Kevin Galton was unimpressed with the many hoops he had to jump through to access his small defined contribution pension. Kevin, from Swindon, originally held a pension with Friends Provident, which was later administered by Aviva. 

Getting access to pension drawdown meant switching to an Aviva Sipp. This required lots of form filling, despite staying with the same company.

Not all existing investments could be transferred and had to be converted into cash first – this took several phone calls to establish. When trying to choose new investments online, Kevin was met with an IT issue. Taking a tax-free lump sum had apparently stopped the account balancing. This meant even more time on the phone. 

A spokesperson for Aviva said: ‘We’re sorry Mr Galton didn’t feel that withdrawing his pension from Aviva went as smoothly as he would have liked.’ 

Aviva said it warned Kevin the process would take between three to six weeks, and his took three weeks. It added: ‘We have the appropriate level of capacity to deal with pension drawdown since the pension changes in 2015.

• Find out more: what you can do with your pensions

Delays and mistakes

Even when your pension provider offers all the options, don't assume accessing your money will be easy.

Complaints about pensions to the Financial Ombudsman Service (FOS) have almost doubled since 2014-15. 

Of the 7,608 complaints received by the FOS in 2021-22, many involve administration issues, poor customer service, or people being given wrong or incomplete information about a pension.

One in four of those we surveyed also described the process as slower than expected. 

Debbie Byfleet from Devon was left nearly £3,000 out of pocket after she waited months to get hold of pension funds she was owed from National Grid and Aviva, following a pension sharing order as part of a divorce settlement. 

The National Grid scheme requested a payment for ‘admin fees’ months into the process, then asked her to cover her ex-husband’s share of fees. Delays by the National Grid scheme meant she was unable to withdraw any money for seven months. 

A spokesperson for the National Grid Scheme said that, while it couldn’t comment on individual cases, it could put Debbie in contact with the scheme’s independent pensions trustees who could answer her questions.

Linda Hobbs, from North Yorkshire, attempted to withdraw money from her additional voluntary contribution pension held with Prudential, but it stalled because she has a building society current account which required the completion of a paper form and further identification checks. 

She said: ‘My experience has been of a shambolic organisation with extremely poor customer service.’

A spokesperson for Prudential apologised to Linda for the delays and poor service she experienced. It also increased its compensation payment to her by £100.

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Change is coming for pension providers

In June, The Pensions Regulator found that more than half (51%) of DC schemes continue to hold at least some member records non-electronically. 

But such old-fashioned processes will need to change under pressure from regulators.

From April 2023, the largest pension schemes will be legally required to begin providing data to new online pensions dashboards. These dashboards will eventually allow you to view all your pension savings in one place online.

Pension providers will have to respond within seconds to a request for data - not weeks, as we've found is sometimes the case.

Direct enquiries from customers seeking further information are likely to increase significantly as a result, putting further pressure on inefficient processes.

For pension providers regulated by the Financial Conduct Authority, a new Consumer Duty will be introduced from July 2023. 

This will include requirements to provide helpful and accessible customer support, and, to make it as easy to switch or cancel products as it was to take them out in the first place.

• Find out more: what pensions dashboards mean for you

How can you access your money without fuss?

While we wait for pension providers to improve, there are steps you can take if you're currently or soon going to access money from a pension:

1. Decide how you'd like to access your money

The government’s free Pension Wise service (for over-50s) or the Which? Money Helpline (for Which? members) can provide guidance on how to take this money. 

We've also got freely available guides on your pension options.

If you need tailored advice, comparison sites such as Unbiased and Vouched For can help you shop around for quotes from financial advisers, but make sure they’re regulated and properly qualified.

2. Know what to expect

The Origo Transfer Index, which tracks the average time for providers to cede money once asked, stands at 13.3 days – though it doesn’t count transfers using paper-based processes. 

At the other end of the scale, providers are required to transfer your pension within six months of receiving all the necessary documents. 

The Pensions Regulator indicates that most transfer requests are likely to be straightforward and will be completed well before this deadline. Other transactions and switching products within organisations should be much quicker. 

Pension providers will have their own timelines, so ask what to expect.

3. Complain if something goes wrong

Your pension is your money, so don't put up with bad service when accessing it.

You should first complain to the company, scheme provider or adviser, in writing. 

If you’ve not heard back within eight weeks or you’re unhappy with the response, you can then contact The Pensions Ombudsman (TPO) or the Financial Ombudsman Service (FOS). Ask your provider which they're signed up to.