Providers have raised concerns over the complexity of occupational pension scheme transfers and poor performance of closed life insurers as policymakers look to improve the pension transfer process ahead of automatic enrolment.
The Government is investigating how the transfer system can be improved as part of a project that pensions minister Steve Webb has labeled 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, points to occupational scheme transfers being more complex and less efficient than GPP-to- GPP transfers.
The main reasons listed are slow response of trustees to transfer requests, complexity of occupational pension scheme rules and “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“Typically, these were schemes that were set up in different regulatory environments, and whose rules have since been superseded, but whose entitlements must, never-theless, be protected. In some cases, schemes were also subject to special additional documentation or rules that might be prescribed by the trustees.”
Hargreaves Lansdown head of advice Danny Cox says: “Occupational transfers are massively more difficult than standard GPP to GPP transfers. It often takes weeks for trustees to respond to information requests.”
Respondents also accuse closed life providers of deliberately delaying transfers to continue receiving charges from members’ funds.
One provider said: “They are making hefty charges on that money as long as it stays with them, so if they can hang on to it for another three or four months, then all is well and good in their book.”