If you walked into your bank and the youth behind the counter – or increasingly the computer screen you face – said you couldn’t get your hands on your cash instantly, you would be outraged.
Rightly so – that is your cash. If the bank said they were unable to give you instant access to your cash account when that is why you chose to bank there, you should pull all your money out.
So, why does the pensions industry think it is OK that some people are currently waiting months to get their hands on their pension pots?
The most common argument is that the regulator expects providers and advisers to act as a line of defence between scammers and savers hard earned cash.
This is a massive problem and I certainly think providers and advisers do have a role in making sure people aren’t conned – pension freedoms mean dodgy dealers are targeting savers in a bid to pinch their pots.
But the soaring numbers of pension scams can’t be used as an excuse for why pension transfers can take many months rather than a matter of days for some people desperate for what is their own cash.
This week research from Origo revealed the real reason why the transfer process is dragging for some is a disconnect between what data pension administrators consider is needed for a transfer value analysis system (TVAS) report and the information IFA firms are requesting in order to advise clients.
The research was carried out among 16 of the industry’s third-party administrators (TPAs) and Employee Benefit Consultants (EBCs) and identified companies had seen increases in requests for cash equivalent transfer values (CETVs) of up to 135 per cent and in actual pension transfers of up to 100 per cent.
This trend was expected to continue or increase once pensions dashboards are introduced in 2019.
Research participants were unable/unwilling to provide end-to-end transfer times, but the regulatory timeframe, as mapped by The Pensions Regulator, for a DB transfer is nine months – basically you could have a baby in the time it takes to get your pension pot (scientific advances permitting).
Included in the transfer assessment requirements is the need for ceding schemes to carry out a number of mandatory checks, including member ID, due diligence on the receiving scheme and advice checks.
These checks inevitably further slow down a process which members expect to be as simple as “transferring money between bank accounts”.
However, one of the most commonly reported barriers to smoother, faster transfers, as cited by TPAs and EBCs, was just inconsistent data requests from IFAs.
This was attributed to the fact that many IFAs were new to dealing with DB transfers and the data that is required for TVAS, and so were applying defined contribution processes and, in consequence, making requests for “irrelevant” information.