Defined BenefitAug 10 2017

Pension transfer delays blamed on IFAs

twitter-iconfacebook-iconlinkedin-iconmail-iconprint-icon
Search supported by
Pension transfer delays blamed on IFAs

The white paper highlighted how the transfer process is suffering from 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. 

This is resulting in increasing frustrations, spiralling administration costs and poor member experience. It is an issue that needs to be tackled sooner rather than later.Paul Pettitt

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.

Included in this 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 inconsistent and constant 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.

This has resulted in some administrators providing the absolute minimum data they believe is required for TVAS, in order to deal with the volumes of requests. 

On the other side of the coin, it was recognised that IFAs consider the information supplied by pension scheme administrators as not fully encompassing their needs in order to provide full advice to the client.

Paul Pettitt, managing director of Origo, said: “What our research reveals is an industry under pressure, working in silos, each with different views of their regulatory commitments and counter-party data requirements and so expectations of what is needed, what can be achieved and by when are very different.

"This is resulting in increasing frustrations, spiralling administration costs and poor member experience. It is an issue that needs to be tackled sooner rather than later."

Origo's survey comes just days after FTAdviser revealed advisers seeking to help their clients access their pension money have found themselves caught between two rival pension providers embroiled in an ongoing conflict over pension transfers.

Pensionbee, a fintech pension provider, has complained to traditional life company Aegon about its slow transfer processes. 

The newer kid on the block has claimed its older rival is employing systems which are directly targeting it, and making life more difficult for Pensionbee customers.

Origio's research also came as the Pensions and Lifetime Savings Association reported the current median time for a pension transfer is 11 days.

Tim Gosling, policy lead for defined contribution at the PLSA, said, however, that some of these transfers take much longer, “principally due to the need to combat fraud risks and achieve appropriate oversight.”

Mr Gosling said: “Whilst the speed of a transfer is one element that a trustee must consider, ensuring the transfer occurs safely and that members get the maximum benefit from their savings is of greater importance.

“In an environment where pension scams are occurring at an unprecedented level, a degree of caution on the part of occupational schemes should be welcomed.”

For Alistair Cunningham, financial planning director at Wingate Financial Planning, said the focus for the industry should be on the consistency of the transfers, and not on reducing the median time it takes to turn this around.

He said: “The standard deviation is absolutely massive, a transfer can take weeks or months.”

Regarding different providers, Mr Cunningham said that occupational pensions are the ones taking more time with the transfers, as they are more complex organisations and have “hundred of different clients in administration.”

When a pension transfer takes too long, “it damages clients’ expectations,” he concluded.

maria.espadinha@ft.com