Providers have raised concerns over the complexity of occupational pension scheme transfers and the poor performance of closed life insurers as policymakers look to improve the pension transfer process ahead of automatic enrolment.
The Government is currently investigating how the transfer system can be improved as part of a project pensions minister Steve Webb (pictured) has labelled ‘Operation big fat pension pot’.
The three core proposals are improving the current system, overhauling the system so a member’s pension follows them when they move jobs, or automatically transferring small pots into a low cost provider such as Nest.
Research from the Department for Work and Pensions, which is based on face-to-face interviews with 15 UK pension providers, suggests occupational scheme transfers are more complex and less efficient than GPP to GPP transfers.
The main reasons listed are the slow response of trustees to transfer requests, the complexity of occupational pension scheme rules and the “archaic” computer systems used to store occupational scheme details.
The paper says: “Some occupational pension scheme rules – particularly in older schemes – could make a transfer more complex or even prevent a provider from accepting a transfer.
“Typically, these were schemes that were set up in different regulatory environments, and whose rules have since been superseded, but whose entitlements must, nevertheless, be protected.
“In some cases, schemes were also subject to special additional documentation or rules that might be prescribed by the trustees.”
Respondents also accused closed life providers of deliberately delaying transfers in order to continue receiving charges from members’ funds.
One provider said: “They [closed life providers] are making hefty charges on that money as long as it stays with them.
“So if they can hang onto it for another three or four months then all well and good in their book.”