Personal PensionAug 20 2014

Altus calls for mandatory open standards for pensions

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Altus has called for ‘open standards’ across the board for electronic pension transfers, arguing the model is much more aligned with other standards and government thinking, while other firms have the ‘if it ain’t broke don’t fix it’ mentality.

Ben Cocks, director at Altus, said it is particularly relevant now in light of the new legislation allowed by the ‘pot follows member’ rules which will be implemented next year.

The new rules means that any workplace pension pot of less than £10,000 would automatically follow the member when they move job. Pension scheme providers and administrators will operate the transfer but individuals will be provided with information and have the right to opt out.

Initially transfers will only be for defined contribution pension schemes, with savers in defined benefit schemes not yet included.

Speaking to FTAdviser, Mr Cocks said: “Open standards means that multiple solutions can then operate.

“The alternatives are having a single monopoly supplier – in this case there is no leverage over costs so it is typically expensive. The other alternative is having multiple incompatible solutions.

“Open standards and an open market solution is important because it means we can contain costs. The benefits would be lower costs, maximum coverage and maximum efficiency.

According to Mr Cocks, relatively recent developments in the industry have meant that this is an important measure which needs to be taken now as opposed to later.

He said: “The industry won’t be able to cope with pot follows member unless we solve the pensions transfer problem.

“Open standards is the only one that will give you the ability to handle problems across the industry. All different sectors of the market need to talk to each other about this [electronic transfers].”

However, for others in the industry, making open standards a mandatory requirement is not necessarily the best solution.

Jeffrey Mushens, technical director at the Tax Incentivised Savings Association said: “Open standards are the precursor to enabling effective competition in the markets.

“For pension transfers, we would like to see them as a default but I’m very suspicious about them becoming mandated. I don’t want to see constraints coming into the market - if they [pension transfers as they are] work well then why force them to change.

“The Origo community I understand does work well. I would not like to see a requirement of something that works well in the market to become mandated.”

Origo is Altus’ biggest market competitor and does not currently use open standards for electronic pension transfers.

A spokesperson at Origo said: “The speed and efficiency of pension transfers has improved dramatically over the last five to six years, as slower, manual processes have been replaced with faster, online processes.

“Advances that, as a not-for-profit organisation, Origo has been happy to lead on behalf of the pensions industry, notably through the development of the Options Transfers service.

“Through Options, automated pension transfers have been taking place in as little as 45 minutes. The recent development of open standards has introduced an alternative means to effect pensions transfers.

“Origo will fully support the government’s ‘pot follows member’ initiative and will develop Options Transfers to make sure that the industry can continue to be able to transfer pensions on behalf of their customers, swiftly and safely, when and where they need to.”