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Providers raise concerns over ‘complex’ occupational pension transfers

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“Typically, these were schemes that were set up in different regulatory environments, and whose rules have since been superseded, but whose entitlements must, nevertheless, be protected.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.”

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Comments

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

  1. “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.”

    No s***t Sherlock. Hardly needed a survey to come up with this pearl of wisdom.

  2. On a straightforward PP to PP transfer recently, I found that Abbey Life require receiving scheme to sign the transfer acceptance form BEFORE the scheme member signs the discharge. Obviously there are ways around this…. but this is a perfect case of an insurer being awkward just to hang on to business for a few extra days.

  3. ….a project pensions minister Steve Webb has labelled ‘Operation big fat pension pot’.

    I strongly suspect that Mr Webb is merely stating one his own, highly achievable, career objectives. Very few clients we ever meet are likely to have a ‘big fat pension pot’ to worry about anytime soon.

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