Pension holders left frustrated as outdated providers keep industry in last century, Which? finds

Poor service and the antiquated systems of major pension providers are leaving customers struggling to access their savings, according to Which?. New research from the consumer champion lays bare the difficulties inflexible pension providers are creating for savers, seven years on from the arrival of pension freedoms designed to usher in a new era of flexibility for those with defined contribution (DC) pensions. The 2015 reforms were introduced to give savers more choice about what they can do with their retirement savings. They allow DC pension holders to buy an annuity (previously the default), keep their money invested and take an income (drawdown), or take the whole pot as a lump sum. But in a survey of 2,153 Which? members who accessed one or more of their pension pots in the last 24 months, Which? found one in six (17%) had to take the burdensome step of transferring their pot to another company to achieve their preferred method of access. Long delays were a common theme, with one in four (25%) describing the process as slower than expected. Debbie Byfleet 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. In a striking example of how some providers are not ready for the digital age, in June The Pensions Regulator found that more than half (51%) of DC schemes continue to hold at least some member records non-electronically. 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." Which?'s findings echo Financial Ombudsman Service (FOS) figures, showing complaints about pensions 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. A new Consumer Duty is set to come into force in July 2023 for pension providers regulated by the Financial Conduct Authority, requiring companies to give 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. Which? says the regulator should keep a close eye on pension providers to make sure they are meeting these requirements now. To help pension holders navigate this complex market, providers need to have all of their information, including their State Pension, in one place. With employees working more jobs in their careers than previous generations and having extra pots to keep track of, and with the threat of millions of pounds being lost to dormant or unlocated pensions, the need for the pensions dashboard is as important as ever. Which? is calling on the government to ensure dashboards are launched without unnecessary delay. Providers should prepare by getting their data and processes in order without delay.
Sam Richardson, Deputy Editor of Which? Money, said: "Our pensions survey paints a picture of archaic providers that are rooted firmly in the last century and seemingly unwilling to modernise. "The introduction of pensions dashboards could solve a lot of these problems for savers, so sections of the pensions industry must stop dragging their feet and let the government launch dashboards without delay. "The regulator should also keep a close eye on pension providers to make sure their customer service is meeting improved standards."
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Notes to Editors Which? surveyed 2,153 members of its online panel in June 2022.
Case studies
Linda Hobbs, from North Yorkshire, says she made multiple attempts to access her additional voluntary contribution (AVC) pension held with Prudential. Numerous lengthy calls didn't help, and she eventually complained and received compensation from the company. Another attempt to withdraw money this year stalled because Linda has a building society current account which required the completion of a paper form and further identification checks. She told us: "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.
David Hustwick, from Halifax, was faced with a huge tax bill when trying to move his pensions into drawdown. He encountered inflexibility head-on when he wanted to move his four pensions into drawdown, after taking the 25% tax-free lump sum from each one. He held pots with Royal London, Standard Life, Prudential and Phoenix. They told David that for all pensions, he'd need to take the remaining 75% as income at the same time, potentially incurring a huge tax bill. After enquiring further, David was able to transfer the Royal London and Standard Life pots to different products with the same companies to access drawdown. Prudential and Phoenix required David to take financial advice before a switch to drawdown could be allowed. As a proactive manager of his pensions, David didn't feel the need to pay these high advice costs, so he moved these pensions to Royal London and Nest respectively. David wonders why his providers haven't done more to make the move to drawdown easier.
Debbie Byfleet struggled to get hold of pension funds she was owed, following a pension sharing order as part of a divorce settlement. Debbie found there was 'little joined-up thinking' when trying to access the money from her schemes with the National Grid and Aviva and move them into her Zurich pension. The Devon resident had to send and resend various documents to the National Grid administrators. 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 admin fees. The pension sharing order was made by the court in early October 2018. However, various problems meant that the National Grid funds didn't arrive until May 2019 and Debbie couldn't claim any income until both transfers had been made. A spokesperson for the National Grid Scheme said that, while it couldn't comment on individual cases, it had put Debbie in contact with the scheme's independent pensions trustees who could answer her questions. She said: "Delays cost me nearly £3,000 when I needed this money the most."
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 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. Kevin suspects that companies haven't scaled up since the pension changes and their products haven't been tested. He said: "A lot of these modern pension products are only just being drawn upon." 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."
Advice If you've got pension pots you're yet to access, the government's free Pension Wise service (for over-50s) or the Which? Money Helpline can provide guidance on how to take this money. If you need tailored advice, comparison sites such as Unbiased and VouchedFor can help you shop around for quotes from financial advisers, but make sure they're regulated and properly qualified. Find our guide at
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