Pensions complaints process needs more teeth

Have a complaint about an investment? You can bring it to the Financial Services and Pensions Ombudsman (FSPO) and potentially benefit from compensation of up to €500,000. Have such concerns about a pension, however, and you can bring it to the same office, but don’t expect a windfall, even if you should be due one.

Yes, it’s a curious state of affairs that the FSPO has greater oversight to award compensation against a wide range of financial services providers, including banks, investment advisers and insurance companies, but its powers are so limited when it comes to pensions.

Indeed this year, pensions only accounted for 4 per cent of overall complaints to the FSPO, according to its annual review published on Tuesday. But is it because the pensions industry is near-flawless in its treatment of savers? Or is it rather because the FSPO’s hands are so tied when it comes to dealing with complaints?

Up until the end of 2017, the Pensions Ombudsman operated as a separate entity, but was amalgamated with the broader financial services sector from January 1st, 2018. When this happened, the legislative remit of the old Pensions Ombudsman was simply carried over.

Davy, Dolphin & Greensill: Lessons from recent financial scandals

---

PTSB’s new low-rate mortgage available only to new customers

---

Insurance can pay inheritance tax bills... at a price

---

Stay at home parent? How to top up your State pension

---

Missed opportunity

However, this must now be seen as a missed opportunity to ramp up the powers of the FSPO when it comes to pensions.

As the Ombudsman himself, Ger Deering, concedes, the powers of the office are “limited” when it comes to pensions.

While he can direct rectification under legislation governing the FSPO, he can’t offer additional compensation, as any redress can’t exceed any actual loss of benefit under the pension scheme.

So, for example, if you had a legitimate complaint against a pension provider, perhaps around information dispensed by an adviser, but were actually treated in accordance with the scheme rules, then the Ombudsman can’t compensate you for that. If, however, it was an investment or banking product, then compensation of up to €500,000 could potentially be on the table.

In addition, when it comes to publishing decisions, the office can only publish case studies when it comes to pensions – not the full decision – and nor can he name or shame any pension provider, even if it has had numerous complaints upheld against it.

For many of us, our pension will be our household’s biggest asset, greater even potentially than our home. So there is a certain irony perhaps, in the fact that you can complain about a €200 travel insurance policy, and potentially get compensation, but you can’t when it comes to your pension.

Surely this should be reviewed.

Legislative lacuna

It’s not the only place there’s scope for enhancing the service of the Ombudsman. The office could also be strengthened in a further way; by requiring financial services providers to take systemic action on foot of upheld complaints. After all, the power of awarding compensation to one customer who made a complaint can be vastly multiplied if others in the industry also have to abide by this ruling.

This happened last year, when more than 7,000 consumers received rectification or compensation on foot of a small number of decisions, mainly related to trackers.

These consumers made no complaint. Rather, their remediation came about because several financial service providers applied the direction given in the Ombudsman’s decisions to other customers with similar circumstances.

However, the office actually has no legislative footing to do this. As Deering says, “I can’t direct this.” Instead, it comes down to the “goodwill” of the industry. But imagine the potential benefits if an upheld complaint could have a much broader application.

Name and shame

There may also be merit in expanding the Ombudsman’s powers when it comes to the naming and shaming of financial services providers. Before 2013, it could not name any of the financial services institutions it received complaints against. Now it can, but only those that have had at least three complaints upheld, substantially upheld or partially upheld, in a year against them.

Contrast this with the UK, where not only can you read the exact complaint taken against each financial services provider, you can also search by their name. So Ulster Bank, for example, had 14 complaints made against it in 2011; five of which were upheld (four related to bank accounts, and one to mortgage).

Trackers not upheld

The latest update from the Ombudsman also gave an insight into tracker mortgages. It's now six years since the scandal first became the subject of a Central Bank investigation, and you'd be forgiven for thinking that the issue is still significant. The office, for example, still has about 1,200 complaints still outstanding and for every query it completes, it's getting another complaint in, with more than 400 complaints received last year alone. However, a significant number of tracker mortgage complaints are now not being upheld.

One mortgage holder complained they had not been offered a tracker mortgage back in 2004, despite it being a “constitutional right” and failure to get such a product had been “financially devastating”. Deering however, rejected the complaint that the borrowers did not “have any contractual entitlement to switch”. He also warned that some complainants may have “unrealistic expectations”, such as arguing that you were entitled to a tracker because “my sister or cousin was offered one”.

Potential complainants take note.