The Government is facing calls to fine providers which take longer than two weeks to transfer pensions as industry opposition grows on fundamental small pot reform.
In a Department for Work and Pensions consultation, entitled, Meeting Future Workplace Pension Challenges, which closed last month, policymakers put forward three possible options designed to help people consolidate small pension pots.
The options are improving the current transfer framework, introducing a system where pension pots follow the member when they switch jobs and automatically transferring small pots into an aggregator scheme such as Nest.
Hargreaves Lansdown head of pensions research Tom McPhail (pictured) says: “We need to dispense with grandiose plans to consolidate small pots and focus on improving what we have.
“The Government should look at introducing an explicit requirement that any request for a transfer is executed within two weeks and if that is not delivered, providers should be hit with an on-the-spot fine. That would change behaviour overnight.”
Evolve Financial Planning director James Norton says: “I would love to see providers fined if transfers take longer than two weeks. The customer service of the big insurers is often appalling and this is a straightforward way to force immediate improvements.”
McPhail says private sector providers should have the option to “push” pension pots worth less than £2,000 into Nest.
His comments follow concerns raised by the Government-backed Nest scheme that an automatic transfer system will increase member costs and reduce overall pension saving.
Last month, Standard Life head of pensions policy John Lawson called on the Government to scrap plans for an automatic transfer system and instead develop a virtual platform where people can view their savings.