FOS complaint data, an accumulation of decumulation?

FOS has published its half yearly complaint data for January - July 2023, this shows an increasing upwards trend in decumulation, life and pensions complaints which is only likely to continue.

The first half of this year has seen a marked increase in complaints to FOS compared with the corresponding period last year, with the total number of complaints received totalling 93,114 (up from 79,921). This is at least partially due to sharp increases in building and motor insurance complaints, which FOS notes hit a five year high during this period. There was also a significant increase in fraud complaints under the banking and credit sector.

Of particular interest (to me, at the very least) was the uptick in complaints concerning decumulation, life and pensions. FOS received 4,189 new complaints in this category for the period, up from 3,842 for the same period in 2022. This follows a general trend, as the first half of 2021 saw only 2,447 complaints in this category.

FOS notes the economic challenges that people are facing when discussing the data. The impact of the ongoing cost of living crisis and the effect of inflation on pension funds (particularly with a high proportion of liquid assets, including cash) means that these economic challenges will be keenly felt by those whose pension funds are currently in drawdown. This is an area that has caught the attention of the FCA, who are completing a review of retirement income advice.

RPC has previously highlighted concerns with drawdown advice in our podcast. In a nutshell, advisors could face complaints (justified or not) if customers are encouraged (or, indeed, simply allowed) to withdraw unsustainable levels of income from their pension. The current attractiveness of annuities could also cause issues, as a customer who has depleted their fund may turn around and say that they should have been advised to purchase a secure income given the rates on offer and should not have had been exposed to the temptation of drawing down on a fund that was intended to last (potentially) for decades.

The results of the FCA's review are expected this Autumn and, if the FCA identifies any thematic issues we could well see moves to rectify any instances of unsuitable advice. In general, it seems that complaints around pensions in some form are not going to go away for the foreseeable future.