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Call to fine firms who miss 2-week pension transfer deadline

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.

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Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. While I agree with the principle behind this I assume that this will only relate to insurance company funds as more complex schemes, such as SIPP’s, may have underlying assets which may make this timescale impossible to achieve.

  2. Matthew Worthington 5th April 2012 at 4:47 pm

    I think it’s an excellent idea; certain providers routinely take months to complete transfers of straightforward contracts, and there are constant complaints of clients being financially disadvantaged as a result of this. A fine would certainly speed things up and save FOS some work!

  3. Why should it only apply to small pots?
    With technology these days it should not matter how much is being transferred

  4. David Trenner - Intelligent Pensions 5th April 2012 at 5:48 pm

    There seem to be two stories in here: Tom McP thinks slow transfers should lead to a fine – regardless of size – and he also thinks that small pots should go into nest.

    I agree on the fine for slow transfers, where there are no mitigating circumstances. Ironically the largest transfers – which might create genuine cashflow issues – are often the quickest.

    If fines are introduced who will go bust first? My nomination is Windsor Life.

  5. Nichol Weatherston 21st April 2012 at 4:53 am

    A 2 week transfer time should be achievable. Companies using the Options Service are making transfers in less than 9 calendar days. I have included a link to the Options Service performance report which includes a list of participating companies. http://www.origoservices.com/options/performancefigures)

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