Personal PensionJul 11 2014

McPhail demands electronic pension cash transfers

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Electronic cash transfer functionality should be a minimum across providers in the pensions industry, Tom McPhail, head of pensions research at Hargreaves Lansdown, said.

Speaking at the Tax Incentivised Savings Association seminar held yesterday (10 July) on the ‘looming pension transfers challenge’, Mr McPhail said it would be a big step forward for providers to offer electronic transfer functionality across the board.

He urged providers to take action on the matter and begin to move in this direction.

Mr McPhail said: “Looking after individuals long term savings and investments is a responsible business.

“If you are operating a regulated pension scheme, particularly an auto-enrolment scheme, subject to governance controls independent governance committees, a price cap, commission, consultancy charging ban, it beggars belief that in the 21st century you might be able to do all these things but not transfer cash electronically within a specified timescale.

“All pension providers should sign up to, or be required to sign up to, minimum standards regarding the processing of transfers of pension assets. We don’t have to set particularly onerous time limits from the outset but we do have to move in this direction.”

Mr McPhail also noted if pensions providers did not do this willingly by themselves, they should not be surprised if it was enforced.

He said: “Over time as the industry adapts and systems progress we can ratchet down the limit.

“If we are not willing to do it ourselves then we shouldn’t be surprised if such controls are imposed from the outside. Initially such standards can only be applied to cash transfers, and some assets will always be difficult to shift in specie.

“Private cash transfers supported by electronic communications and processes should be taking a matter of a few days as standard rather than a few weeks, which is still often the case.”

On the recent changes in the annuity market announced in the Budget, Mr McPhail suggested he saw this as indicative of a market that has been too slow to react.

He said: “What happened in the annuity market is demonstration of what happens if an industry resists reform for too long.”