Defined Contribution  

Standards body looks to fix pension transfer problems

Standards body looks to fix pension transfer problems

The Pensions Administration Standards Association (PASA) has created a pension transfers working group, with the goal of producing better, faster outcomes for members.

The objective of the standards body is to identify current issues and potential solutions relating to the administration of defined benefit (DB) trust based pension transfers, by looking at the transfer supply chain for occupational schemes and helping improve the experience for all parties.

With the introduction of pension freedoms in 2015, savers have been seeking to take advantage of the high transfer values of DB schemes and to move their nest eggs into defined contribution (DC) plans.

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Figures published by Mercer in April showed that as much as £50bn has been pulled from final salary pension schemes in the last two years.

According to figures released by HM Revenue & Customs (HMRC) last week, more than £14bn has been unlocked from pensions since pension freedoms came into effect.

Gary Evans, board director at PASA, will be chairing the group, which appointed its members today (3 January).

He said: "The influx of transfer requests has been widely reported for some time, with many calling for greater consistency in the time taken between the point of request and the payment being made to an individual’s arrangement of choice.

"Whilst PASA echoes these calls and support members having every right to gain efficient access to their pension savings if eligible, there are a number of factors that can legitimately hold up the process and therefore must be taken into consideration.

"For example, DB trust schemes are particularly complex in nature and present a number of unique governance challenges and, elsewhere, administrators will be taking appropriate steps if scam activity is suspected."

Mr Evans added that the transfer process can be frustrating for the scheme member, "but it is important to remember that these steps are taken solely for their protection".

He said: "If we work together to help people understand this and manage expectations when a transfer is requested, we will go some way to easing these frustrations."

Mr Evans believes, however, that there "is definite room for improvement in the process".

He said that the lack of clear guidance is "presenting a real issue for administrators, independent financial advisers and insurers alike - all of whom will understandably have different priorities".

The PASA's working group "will be looking closely at all aspects of the supply chain to work through issues and produce solutions, as well as guidance to act as a reference point and create a smoother, more positive experience for all involved," he concluded.

The Pensions Regulator, which is also involved in Pasa's initiative, is already working on a pension transfer template, with the goal to create a form to be filled by pension administrators when they are asked for a DB transfer value.

According to Alan Chan, director and chartered financial planner at London-based IFS Wealth & Pensions, "it’s a great idea to establish a working group and to achieve a level of service standards that is consistent across the board".