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.