Pension Transfers Blocked by Phoenix Life

In recent days, Phoenix Life has announced that, since 2013, it has blocked the transfer of ‘suspect’ pension transfers to the value of £29 million. This, at first glance, seems like a good thing. After all, none of us want pension savers to lose their money.

But drill a little deeper and all is not quite so rosy. Across the industry, we see many different pension providers looking to block pension transfers—and this at a time when the government is promoting pension ‘freedoms’.

What exactly are the pension companies frightened of? There are two reasons why they might consider blocking a transfer:

  1. They believe that the person is planning to take their pension fund out prior to the legal age of 55, which is against the law.
  2. They believe that the person may be subject to a ‘scam’. There are two levels to this. It could be that they believe the investor will lose all their money through fraud, or they believe that the investment may not be ‘suitable’.

Here’s where the problems start. Since the pension company has proudly blocked the transfer, it has never taken place. So, they can’t know for sure what would have happened if the person had transferred! Suppose their information was wrong? Suppose the investor had made a positive decision to adopt a higher risk investment strategy in the expectation of higher returns? Suppose they weren’t planning to take the fund before age 55?

If we were talking about medicine and various tests, we would be discussing false positives and false negatives. False positives are where the test says “yes you have this,” but actually you don’t. And false negatives are where the test says “no, you don’t have this,” but actually you do. In medicine, a lot of thought and analysis goes into understanding the level of false negatives and false positives.

But nothing like this happens in the pensions world. There is no measure of false negatives or false positives. Simply large-scale blocking of pension transfers against personal wishes. You could be forgiven if you wonder why a pension company has any right at all to decide about YOUR money! If you don’t agree with the pension company refusing your transfer, then you can appeal to the pension ombudsman. This has a reasonable chance of success and we know pension companies that have been forced to make a transfer even though they initially refused.

My personal view is that so called ‘protection’ of investors has gone too far and smacks of a nanny state when individuals can’t make their own decisions. We applaud initiatives that stop people losing their money, but I hate overbearing companies that make dubious decisions for clients on the basis that they know better.

If you are stuck in this situation, with a pension transfer that has been blocked for no good reason, then don’t despair. Appeal to the pension ombudsman and search online for information and comments from other people who have been there and got it finally sorted. And while you’re at it, be sure to request a copy of my F.R.E.S.H. investment report to see how you can make the most of your pensions and investments.

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