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Pension dashboard threat to closed-book firms


Providers could be hit by a surge of customer transfers, following the launch of a pensions dashboard, software consultancy Dunstan Thomas has warned.

The Treasury is committed to backing a new, industry-developed, dashboard by the end of 2019, although experts have warned that the timetable could be “unattainable”.

However, Dunstan Thomas has now warned that firms with substantial back books could be hit by the programme, with transfers expected to cost ceding and receiving schemes upwards of £50 each.

The firm says: “The general direction of travel of transfers will be from higher charge products to lower charge products. This is partly because older products tend to have higher charges attached to them, and partly because a reduction in charges may be a motivator in making the move.

“The upshot is that if a Pensions Dashboard provokes an increase in transfer activity then it is likely to be value destructive for the industry as a whole. Although some players will see it as positive as it will enable them to reach the critical mass needed to run a modern low cost pension scheme quicker than they could if they only built up their assets under management from new monthly contributions.”

Dunstan Thomas added the move could push providers into re-engaging with dormant customers.

It adds: “That could prompt activity by the original pension provider, to send a reminder to the customer about all the benefits of the old policy, and about the wisdom of maintaining a diversified basket of investments.

“If the policy is also still open for receiving future contributions then it could remind the customer of how to make new payments too. If you can’t let sleeping dogs lie, then it’s good to be warned the moment they awake so that appropriate actions can be put in train.”

The comments come just over two months after the FCA launched investigations into six providers over it’s treatment of closed book customers.



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There are 3 comments at the moment, we would love to hear your opinion too.

  1. Christopher Pitt 11th May 2016 at 11:54 am

    Just because a provider has decided not to take on any more new business it doesn’t mean that their existing policyholders feel any differently about their own pension contracts. They will surely expect the same levels of service and performance as if the provider was still seeking new business. And, if the pensions dashboard encourages people to take a greater interest in their accumulating funds and they come to realise that they might get a better deal elsewhere then surely that’s a good thing? As a consumer I wouldn’t want to be left in a dormant savings account paying almost nothing in terms of interest, so why would I feel happy being left in a closed book pension scheme with high charges and restrictive terms? Surely real value is created when we, as an industry, treat customers fairly and deliver the best returns we can?

  2. Wholeheartedly agree Christopher!

    Here’s an idea – how about providers of the expensive legacy products proactively contacting customers to offer them better, cheaper deals rather than letting “sleeping dogs lie”? This might give them the opportunity to a) retain the customer, b) decommission costly old mainframe batch systems and c) deliver a 21st century real-time view of the customer’s savings.

  3. Mark Coughlin 11th May 2016 at 4:15 pm

    Jon – the closed book firms don’t have anything new to offer customers and their current owners bought them for the cash cows they are. So without legislation changes they aren’t going to do something that will reduce their profit margins.

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