View more on these topics

MM leader: Pension transfers lag tech advances

Natalie Holt website

Osborne, the chief puppeteer of the UK pensions market, is at it again. The focus of his recent reactionary announcement on pension freedoms was plans to impose a cap on “excessive” exit fees. But the other strand, that of a “quicker and smoother” pension transfer process, poses no less challenge for the industry.

More details are expected to be set out as part of next week’s Budget, but broadly the Government wants pension transfers to happen “easily, within a reasonable timeframe and at a reasonable cost”. We await definition of what is “reasonable” in the Chancellor’s eyes.

As it stands at the moment, some pension schemes have a long way to go before they meet the quick, smooth process Osborne is gunning for. While transfers between contract-based, retail schemes are around six days, by comparison occupational schemes are dragging their heels, taking between six to eight weeks. For Sipps, given the fact assets are likely to be less liquid, the process can be anything between six months to two years.

The driving factors behind slow transfer times are manifold. Cynics say this is about a reluctance to let go of lucrative pensions business. A kinder argument might be that the process may be slower because trustees are taking their responsibilities seriously, plus all the usual due diligence in terms of guarantees and benefits lost that also applies.

It may simply be that some schemes have never been forced to make reasonable transfer times a priority. The upcoming Government consultation represents an opportunity to tackle this head on.

After all, it should be within the industry’s power to bring down transfer times. The dominance of online banking, and the strides that have been made on electronic re-registration between platforms over recent years, all mean it should be possible to deliver “reasonable” transfer times without skipping over the appropriate checks and balances.

Long-suffering advisers battling providers’ antiquated systems will no doubt be familiar with the mismatch between the powerful, innovative technology that exists today and an inability to secure basic information like valuations, let alone carry out “smooth” pension transfers.

At a time when we can land robots on comets hundreds of millions of kilometres away, Osborne’s wish for a more effective transfers market should not be that inconceivable. As auto-enrolment is set to bring an increasing number of smaller firms into play, it would be better if this issue was tackled sooner rather than later.

Recommended

Ian McKenna: Race is on to solve the pensions data puzzle

For decades Britons were far more likely to get divorced than change banks but this is no longer true. How this change has been achieved provides an important lesson for the long-term savings industry and presents a clear case for action by life companies and platforms. Not only is it now possible for people to […]

Money-Cash-Coins-GBP-Pounds-UK-700x450.jpg
68

How much are advisers charging for pension transfers?

Advisers and networks are charging wildly different prices for advising on defined benefit to defined contribution pension transfers, Money Marketing research suggests. As well as a split between charging on a time cost or percentage basis, some firms appear to be charging as much as two times more than others. Firms that offer pension transfer […]

Otto Thoreson 700.jpg

Nest reveals its blueprint for pension freedoms

Nest has unveiled its “blueprint” for a retirement income strategy in the wake of pension freedoms based around three “building blocks”. In November Nest launched a wide-ranging consultation on how it should respond to the Government’s freedom and choice reforms. Its proposals for post-retirement portfolios centre on three strands: an income drawdown fund, a cash […]

UK-Currency-Money-Pound-GBP-620x430.jpg
1

Allianz Global Investors hits out at rogue investment bankers

Allianz Global Investors global chief executive Elizabeth Corley has lashed out at investment bankers claiming that too many do not care about unscrupulous behaviour, The Telegraph reports. Corley, who also heads the new Fixed Income Market Standards Board, which was set up by the Bank of England in a bid to get the City to […]

HMRC helping to remove artificial gains

An investment bond offers investors certain tax advantages, one of which is the ability to take partial surrenders from the investment. This facility allows the policyholder to withdraw amounts up to 5% of the amount invested each policy year on a tax deferred basis, without incurring any immediate tax liability. This tax deferred allowance can […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment