Selasa, 01 Mei 2012

How dead insurance funds are holding on to your life savings for months on end

How dead insurance funds are holding on to your life savings for months on end

By Dan Hyde

PUBLISHED: 19:06 EST, 1 May 2012 | UPDATED: 19:06 EST, 1 May 2012

Thousands of pensioners are being deprived of as much as £11,000 each by ‘zombie’ insurance companies which hold their savings hostage for up to four months.

So-called zombie insurers â€" firms no longer take on new customers â€" are sitting on billions of pounds squirrelled away by more than three million people in the Seventies, Eighties and Nineties.

Some of these closed funds are dallying for a whole month before replying to savers who, desperate for a better deal, ask to transfer their pension to a new provider. It can then take another three months before the cash is released. Yet we can reveal the paperwork to transfer a pension fund can take as little as two hours to complete.

Zombies: Firms that no longer take on new customers hold pensioners' savings for up to four months

Zombies: Firms that no longer take on new customers hold pensioners' savings for up to four months

During a four-month delay insurers can pocket an extra £1,000 in charges and fees. And pensioners turning their nest eggs into income can be left £10,000 worse off over a 20-year retirement if payout rates are cut while they wait.

Billy Burrows, an independent adviser at the Better Retirement Group, says: ‘Transferring a pension is a complete nightmare. The whole thing is more of a cock-up than conspiracy. Closed life insurers just don’t put any importance on pension transfers.’

A Government-commissioned report, published in April, accuses closed pension firms of deliberately dragging their feet in a last-ditch bid to fill their coffers with fees taken from their customers’ savings.

The flopped firms can rake in as much as £100,000 for every 100 customers who want to move their savings elsewhere, Money Mail research estimates. This is due to high fees on old pensions, which are often far steeper than modern-day alternatives.

One pension firm, which wished to remain anonymous, in the Department for Work and Pensions report told investigators: ‘[Closed pension firms] are making hefty charges on that money as long as it stays with them.

‘So if they can hang on to it for another three or four months, then that’s all well and good in their book.’

It should take no more than ten working days to transfer a pension, according to industry guidelines laid out by the Association of British Insurers in 2006. Modern computers are so speedy that admin staff can file a pension transfer in just under two hours.

Some 25 firms are signed up to a rapid transfer system where it usually takes just nine days to move pension pots â€" down from 51 days in 2009. Closed insurers such as Windsor Life, Abbey Life, Lincoln, Allied Dunbar, and Phoenix Life deny long delays are still commonplace.

But financial advisers, who manage hundreds of pension transfers daily, say snail-paced service, obfuscation and antiquated procedures are still common at closed providers â€" particularly on old workplace schemes.

Older company pensions have complex rules, paper filing systems and trustees who have to give unanimous permission before a transfer can go through. Many trustee groups meet only once a month, at a stroke adding 30 days to response times. These schemes are excluded when pension providers publish their transfer times.

Simon Bonnet, head of advice at private bank Duncan Lawrie, says: ‘We are banging our heads against a brick wall. The standard response time from closed life insurers is ten to 15 working days. If you don’t ask the exact question you need to, it’ll take another 15 days.’

Pensions taken out decades ago at big insurers such as Allied Dunbar, Lincoln, Abbey Life and Windsor Life (now called ReAssure) typically charge killer fees, out of touch with lower-cost modern pensions.

For example, one Abbey Life policy takes £750 a year from each £10,000 in a pot if a saver stopped making regular contributions within the first 12 months.

One Lincoln policy charges a ‘marketing’ fee of around £50 a year even though it is shut to new customers. Such high charges could see £1,000 siphoned off an average £40,000 pension every four months.

For pensioners coming up to retirement, the delays can pose another expensive problem. Most savers convert their pension pot into a regular income by taking an annuity. The rates on annuities change regularly.

Between July and November last year they swung by as much as 8 per cent â€" cutting the income from a £100,000 pension pot from £6,000 a year to just £5,520.

Anyone whose pension was delayed in this period and was forced to take a lower annuity as a result could be down £1,300 in fees and another £10,000 from the lower payouts over a 20-year retirement.

Nick Combes, a director at Holder Combes, says: ‘It’s like turkeys voting for Christmas. These contracts have been financially very lucrative for these providers because the charges are horrendous.’

Every month, the Financial Ombudsman Service, which settles disputes, receives roughly 30 letters complaining about long transfer delays â€" one in ten of all pension complaints.

In January, the Pensions Ombudsman, a separate body, helped a pension saver win nearly £20,000 in compensation from Aegon over a needless four-month delay in transferring funds. Closed funds differ greatly in their transfer times.

Two million closed pension plans are now managed by Phoenix Life, including policies from Pearl Assurance and Scottish Mutual.

Shellie Wells, from Phoenix, says: ‘Our transfer times used to be quite high, but since we’ve been able to pinpoint where the problems are, they’ve come right down.’

Between January and March this year, Phoenix averaged 11.6 days for transfers to pensions, and 12.4 days to convert a pension into an annuity using the rapid transfer system. Abbey Life and ReAssure also use the rapid transfer system. This has drastically cut transfer times on private personal pensions since it was launched in 2009.

But Phoenix and Abbey Life still lag at the bottom of the transfer table, with Abbey Life taking five days longer than average.

Not all pension providers are signed up to the rapid transfer system, which can be used only if both companies subscribe. Allied Dunbar, which has 500,000 clients, is yet to sign up.

A spokesman claimed it processes the majority of transfers in five working days. One closed insurer insisted delays are avoided at all costs. It said any hold-up adds to the administration costs and rubbished claims of deliberate delays.

The Pensions Ombudsman can be contacted on 020 7630 2200. Calculate how much you need in your pension pot for a comfortable retirement at thisismoney.co.uk/pot.

Here's what other readers have said. Why not add your thoughts, or debate this issue live on our message boards.

The comments below have not been moderated.

  • Newest
  • Oldest
  • Best rated
  • Worst rated

HSBC is the same............ On investments tehy clear the money out of your account in two days, but when they pay out, it can take a month. They were quite rude about it as well when I pushed them on the delays.

Report abuse

I wonder sometimes at your Financial People. Buffet used Pension Money who owned within his organisation to borrow from so he could speculate. Speculation is used by Pension, Councils and anyone who has a steady cash flow and can afford to lend the money to someone to speculate with. Insurance Companies and Companies and Unions with large Pension Funds regularly loan the money to other companies for a specific period of time ... often renewed with the agreement that any profits have a contribution returned to them. Buffett has been using Insurance Funds from within his organisation to make these profits for years. If you doubt it then read the Economist.

Report abuse

The views expressed in the contents above are those of our users and do not necessarily reflect the views of MailOnline.

Diposting oleh di

Tidak ada komentar:

Posting Komentar

Langganan: Posting Komentar (Atom)