With pension transfers comes the headache of waiting to complete a transfer and improve client satisfaction.
In response, Origo first launched the Options service in 2008, addressing the issue of time taken for ceding and annuity providers to complete the transfer of data and funds. Options has since been extended to cover pension transfers.
Transfer timescales have significantly reduced to about nine days. Such improvements demonstrate meeting treating customers fairly obligations and those in the field have noticed a difference.
This is all good news but the industry cannot rest on its laurels. In a recent discussion with providers and the Association of British Insurers on transfers, we reviewed annual data from Options and it became clear there is a paucity of data about transfers.
Many will be aware of the demographics that show increasing numbers of baby boomers approaching or just entering retirement age. Coupled with a drive toward greater awareness and take-up of the open market option, this will drive Omo transfer volumes over coming years.
With auto-enrolment commencing this year and recommendations in last October’s Department for Work and Pensions review, Making auto-enrolment work “to ensure it is more straightforward for people to move their pension pot with them as they move employer”, pension transfers will come under increasing scrutiny.
Eighty per cent of transfers now take place between ages 35 and 65, which is to be expected given the pressures on disposable incomes at younger ages. The average and median ages for transfers is 49 years old.
Only a small proportion of pension transfers involve consolidation of more than three pension pots. However, there is evidence of transfers involving up to 10 pots. The average consolidated transfer amount in 2010 was £52,600, higher than the 2009 average.
As with pension transfers, only a small proportion of Omo transfers consisted of more than three pension pots. The data shows a slight increase in the number of pension pots per Omo transfer in 2010 compared to 2009.
The average consolidated Omo annuity transfer value was £45,000. Having improved the pensions transfer process through Options, the costs of completing transactions in this area have been significantly reduced.
Paperwork is easier to complete and there is less of it, meaning the quality of applications is improving. There is a significantly less chasing required by advisers, leading to better commun-ication between the (typically four or less) parties to a transfer. As a result, customers are increasingly satisfied with the service from the providers and platforms using Options.
Advisers must establish their own propositions to support their customers in this sector. With average pension savings at £45,000 when purchasing an Omo in 2010, customers need help to maximise retirement income.
Paul Pettitt is managing director of Origo