Personal PensionOct 15 2014

Pension cash transfers to treble in 2014

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Re-registration service Tisa Exchange has called for the UK financial services industry to adopt electronic pension cash transfers and to improve transfer times.

The organisation estimates that industry costs from pension transfers and consolidation will amount to tens of millions of pounds during 2015.

However, Tex said it will be savers and investors who lose out as providers seek to recover these charges from their clients.

Without a commitment to electronic pension transfers from pension providers and investment managers, savers will continue to suffer from mixed outcomes including a risk to their assets and rising levels of complaints, Tex has warned.

Tom McPhail, Hargreaves Lansdown’s head of pensions research, who is also a director of Tex said: “We owe it to savers to ensure that they can quickly and easily transfer their pension assets and that the process is as cost-effective as possible.

“At present there is limited choice in the pension transfer market and while there are standards in place, these are not open and do not adequately protect the consumer when things go wrong.

“This is wholly unacceptable and not in the best interests of consumers or the industry. If the industry does not act quickly enough, we believe the regulator will, as it has already threatened to do so with investment transfers and re-registrations.”

Tex said that currently around half a million pension transfers are made per year and the number is forecast to rise to over one and a half million in 2015 as a result of more self invested personal pension transfers, pension consolidations and ‘pot follows member’ activity.

The organisation believes that the current manual system, which is form-based, is outdated and can be changed to reduce the cost of transfers.

It said that reducing the cost will also be essential if the transfer of small pots is to be commercially viable.

Mr McPhail added: “A lack of uniformity around service levels means that for some savers transfers can take days, whilst for others it can take months to complete.

“This is not good enough in a world where we can now make immediate case transfers between banks and bank accounts. As a minimum, we are calling for a Service Level Agreement between providers for transfers to take no more than eight days.”

This follows Altus’ call for ‘open standards’ across the board for electronic pension transfers earlier this year. Ben Cocks, director at Altus, argued that 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.

Later this year, Origo announced four key requirements needed to develop an industry-wide pot follows member transfer service for pension transfers to be successful.

The Department for Work and Pensions plans to introduce automatic transfers of small workplace pension pots of less than £10,000 when members move jobs. The ‘pot follows member’ scheme will be implemented next year.

ruth.gillbe@ft.com