“Facts are stubborn things, but statistics are pliable” (Mark Twain).
The Q3 2018 data
The latest FOS complaints data made for interesting reading. For example, in Q3 2018 Sipps had the second highest uphold rate on referral to an Ombudsman at 59%, with the average uphold rate being 33%. Therefore Sipp complaints are twice as likely to be upheld as other types of complaint. Furthermore, there was also a marked increase in the number of Sipp complaints received (with 1,029 enquiries and 1,048 new cases being received in Q3 2018, compared to 777 enquiries and 826 new cases for the previous quarter). The position does not look likely to reduce in the immediate future.
What has potentially caused this increase?
Since the introduction of Pension freedoms, consumers have been taking advantage of the flexibility which these allow. Figures published by HM Government in January 2019 indicate that the number of flexible payments taken in Q4 2018 were £1,900 million, and between Q2 2015 and Q4 2018 the average size of payment increased from £121,000 to £328,000. Pension freedoms are still therefore attractive to consumers, providing flexibility which had not been available before. However, this flexibility, coupled with increasing scams, could account in part for the increase in complaints (after all, no promises were made that consumers would act prudently when pension freedoms were introduced). Add in the number of esoteric investment opportunities and media coverage of court cases, and the increase is not surprising.
The role of the FOS
However, what also needs to be borne in mind with the increases in complaints is the role which the FOS itself plays. The FOS offers a quicker, cheaper and simpler process than litigation for complainants (as litigation can be time consuming, expensive and lengthy). Also, the burden of proof on Claimants in a court claim may lead to different, and potentially less favourable, outcomes for the Claimants than the statistics from the FOS indicate are available if the FOS complaints process is used.
The FCA plays a role in fuelling the litigation too. Its recently launched PPI TV commercial campaign featuring Arnold Schwarzenegger, for example, actively encouraged potential litigants to check whether they had PPI, because if they do, they have a claim - with Arnie’s terminator shouting “Do it now”.
The FOS’ work with Sipp complaints is gaining some coverage too, and this can also partially account for the steady rise in Sipp complaints.
Future Claims Trends?
So the big question is, where is the Sipp and Defined Benefits complaint world heading?
Future claims trends are already gathering, with complaints surrounding guaranteed minimum pension (GMP) equalisation gaining some interest.
The introduction of the Pensions Dashboards may also contribute to future complaints. Once consumers are able to see all of their pension holdings easily and in one place, this may raise awareness of issues which have been hidden for, quite literally, years. As there is no long-stop on FOS complaints, the FOS would be the ideal home for such complaints.
The Regulator has also taken steps to drive standards up. For example, the FCA’s Policy Statement (PS18/20) published in October 2018 has seen new processes and requirements introduced, including changes to relevant exams. Furthermore, the DWP has consulted on strengthening the powers of The Pensions Regulator, and the new powers should act as a deterrent for anyone who is in contravention.
The situation is improving slowly for consumers, with regulators ensuring that protections and safeguards are in place. However, it is not all good news. As our other article explores, the now confirmed increase in the FOS compensation limit to £350,000 from April 2019, for example, has already had an impact on the cost and availability of Professional Indemnity insurance cover.
However, even given the above, and with the best intentions behind protecting consumers, will it really be possible to protect consumers from their own stupidity, yet also give them choice? Among our more bizarre investments, we have come across investments in ships which search for sunken treasure!
The FOS statistics indicate that Sipp complaints may continue to rise for the foreseeable future, although we hope that the changes which have been introduced, and which continue to be introduced, will filter through and stop some of the scams. It is a shame the FCA has been so late in waking up to it and regulating it.