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Ombudsman under fire over pension charges probe

The Pensions Ombudsman faces criticism from consumer groups for taking a year to investigate a complaint over alleged hidden charges in a case which could have implications for millions of policyholders.

The Pensions Ombudsman (TPO) is an independent organisation set up to rule on complaints between individuals and pension schemes.

TPO last year provisionally accepted a complaint lodged by Mark Radin and his wife Mandy against Clerical Medical, one of the UK’s largest pension companies, over what the couple claimed was a failure to provide prompt and clear information about charges deducted from their pension accounts. The company has disagreed with their complaint.

However, rather than go through its formal adjudication process, TPO referred the Radins’ complaint to a specialist team within the organisation because it potentially raised “important and complex” points of law and regulation . . . “which may have wider implications”, according to documents seen by the FT.

In 2020, the Radins first complained to TPO that Clerical Medical — which was taken over by Scottish Widows in 2009 — had not provided them with all the fees history they had requested on their two with-profits policies set up 22 years ago.

The couple suspected poor performance of the policies was due to deductions from their investments which had not been declared on their annual statements.

“In spite of me asking for four years, Scottish Widows has not provided a detailed breakdown of the charges which we suspect were deducted from our pension investments,” Mark Radin told the FT.

“I evaluated my Clerical Medical pension against my other pension investments and my CM policy performance was half that of the other policies, which triggered my concerns about hidden fees amounting to tens of thousands of pounds.”

More than 10mn people in the UK have with-profits plans of the sort held by the Radins. With-profits is a type of “pooled investment” fund, most commonly used by investors for mortgage endowments and pension savings.

Widely sold in the 1980s and 1990s by independent financial advisers working on commission, as well as directly by major insurance companies, with-profits policies gained a reputation for murky charges, high costs and poor performance.

In 2012, the financial regulator tightened its rules on with-profits companies, following concerns that policyholders were not being treated fairly. The Financial Services Authority, the precursor to the Financial Conduct Authority, said at the time: “There could also be better disclosure of costs,” by with-profits companies.

An initial investigation of the Radins’ complaint by TPO’s “early resolution team” in 2021 did not find that charges levied on the couple’s Clerical Medical policies were excessive and had been properly disclosed according to the rules at the time.

TPO noted that the Radin’s financial adviser had not provided them with promised reviews of their investments, which had not performed as well as similar competitor funds.

Undeterred, Mark Radin, who ran a business investigating overcharging by banks and financial institutions, escalated his complaint to the adjudication team at TPO which in June 2021 said it would refer the case to its Specialist Jurisdiction Team in “six to seven months” given its potentially wider implications.

Scottish Widows was contacted for comment on the Radins’ complaint but said it would be inappropriate to comment while the Pension Ombudsman was still investigating. It noted that the Financial Ombudsman Service last year dismissed a complaint by the Radins about poor performance of the Clerical Medical with-profits plans.

However, consumer groups supported the Radins’ calls for a swift investigation. “There have been longstanding issues over the complexity and opaqueness of pension charges,” said Rocio Concha, director of policy and advocacy at Which? the UK consumer group.

“Delays in handling complaints can have serious financial consequences for savers, so it’s unacceptable to keep them waiting for months on end to have their cases heard. The Pensions Ombudsman should be treating this case and similar ones as high priority.”

After being contacted by the FT last week, TPO wrote to Mark Radin by email to apologise for the delay in updating him on the progress of his complaint and said a team manager would be in touch. However, TPO gave no indication when the investigation into the Radins’ complaint would be concluded. It said it would not usually comment on the detail of an ongoing investigation.

“We cannot tell people how long it will take to deal with their particular complaint because this depends on several factors, including how complex the case is,” the Ombudsman said in a statement to the FT.

The service said it knew its current waiting times for complaints to be resolved “were too long”.

“In recent years, our resources have not kept pace with the rising demand for our service. Last year alone demand increased by nearly 12 per cent. The pandemic also affected the service we could provide and how quickly many of the organisations we investigated were able to respond.”

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