Prudential refuses to reply to IT meltdown questions

Savers have been left in the dark by one of Britain’s largest pension companies after it repeatedly refused to answer questions about an IT meltdown that has seen customers locked out of their pensions.

Prudential customers have been blocked from their retirement savings for months on end, unable to receive updated account statements because of a botched systems update. Many pensioners who relied on this income have been forced to make up the shortfall through other means.

Prudential has been unwilling to share crucial information over the disruption, repeatedly failing to respond to questions from Telegraph Money. The pensions giant, which oversees more than £51bn in retirement savings, has offered no indication of when the problem will be resolved or even how many customers have been affected.

In November 2020 Prudential shifted five million customers to a new IT system as part of a software upgrade. This caused severe delays in customer service response times as staff struggled to process paperwork, a spokesman for the group admitted. But Prudential would not say how many people had been affected and whether savers could still be waiting months more to access their pensions.

The company has paid compensation to some customers; according to readers of this newspaper payments have ranged from £ 100 to £300. However, the Pru has declined to comment on how it calculated the reimbursements.

This newspaper has called on Prudential to be transparent with customers who have been left in the dark after its blunder. But when questioned by Telegraph Money, Prudential also failed to disclose whether it had launched an official investigation or if it had reported itself to a supervisory body. The Pensions Regulator said the disruption would be a matter for the City watchdog, the Financial Conduct Authority. The FCA declined to comment, although it is understood that the regulator is in discussions with Prudential.

The pension company said there would be no “financial detriment” to members as a result of the delays. But some savers will face higher tax bills as a direct consequence as they miss out on tax breaks before the end of the financial year in April. Prudential refused to say whether it would compensate customers for these losses.

The income threshold at which you start to pay income tax is £ 12,500. Many pensioners plan their withdrawals around the tax year to stay below certain tax thresholds and minimise their costs.

The IT disaster has derailed plans for many, including Stuart Smith, 74, who has been waiting four months for a £12,000 lump sum. Mr Smith, who spoke using a pseudonym, added that £9,500 appeared to have been “wiped” from his account. He was told he would need to receive an advisory pack before he made his withdrawal. However, on its arrival a month later his total pension value had dropped by nearly 10pc.

“I asked for an explanation and was told that it may be down to the reassessment of final bonuses,” he said. “I don’t understand.”

Mr Smith had planned to withdraw the lump sum before the end of the tax year to avoid incurring a higher-rate tax bill during the 2021-22 tax year. “I’m worried I won’t be able to make any further withdrawals until the 2022-23 tax year if I am to avoid paying the higher rate. I’ll be very fortunate if I manage to withdraw my fund and avoid higher rates of tax before I die,” he said.

Savers whose company pension scheme is administered by Prudential are likely to be the most affected.