Advice firm ranks providers' pension switching delays

According to the Retirement Fairness Index, which is based on analysis of the firm’s own customer cases between October 2017 to March 2018, Mercer is the worst offender, taking 113 days to release funds to clients looking to switch retirement income providers.

On the other side of the list is Sanlam, which takes just 28 days to release funds.  

My Pension Expert has calculated that the Mercer’s delay is costing its clients £889.95.

The provider has been approached for comment.

My Pension Expert’s Index is based on data from 973 clients - 17 of which were Mercer customers.

It uses an average fund size (net of the tax free lump sum) of £49,968 producing an average annual income of £3,823 and a daily income of £10.47.

The data is based on the time taken to transfer from a ceding scheme to a new provider. The start point is the date the signed pack from the client is received by My Pension Expert's office, with the advice firm sending a letter of authority to the provider within 24 hours.

Industry regulations make it impossible to release pension funds immediately.

But long delays by providers undermine the Financial Conduct Authority's (FCA) drive to encourage consumers to shop around with all the available companies for the best deal, the advice firm said.

The regulator said, in its interim findings of the Retirement Outcomes Review, published in July, that it was considering intervening in the pensions market to make it easier for customers to shop around for drawdown products.

A spokesperson for Mercer criticised My Pension Expert's findings claiming the league table does not provide "an accurate reflection of Mercer’s performance compared to our peers".  

"Given that Mercer’s workload is dominated by transfers out of occupational pension schemes rather than other types of arrangement, there are specific considerations to take into account, and processes that must be followed, to ensure transfers are settled appropriately.

"A survey based on just 17 of over 5,578 transfers administered by Mercer over the period of the research does not allow for meaningful comparisons to be made.“

However, Mercer is not the only company to delay pension switching processes.

Reliance Mutual take 95 days to release funds, whilst Capita takes 78; such delays cost customers £701.49 and £523.50 respectively, according to the research.

The advice firm will start publishing the index quarterly, hoping that it “will prompt monitoring bodies to take decisive action against unfair ceding company policies”.

According to Andrew Megson, executive chairman of My Pension Expert, “these delays in releasing funds to consumers are simply not acceptable”.

He said: “The monies caused by the delays can never be recovered. It’s hard to believe such practices have gone unchallenged for so long. 

“As shocking as My Pension Expert’s research is, it acts as a much needed wake up call to the sector. We intend to continue monitoring ceding companies and hold them to account.

“We will also be approaching the FCA with our findings and hope to work with them to ensure that the sector puts consumers first.”

Steve Carlson, chartered financial planner at Cardiff-based Carlson Wealth Management, argued that he isn’t experiencing the type of delays identified by the research.

He said: “These days, most providers usually only take one to three weeks once they’ve got all the paperwork they require.

“I do still get cases that drag on for months, although that’s usually because of chasing information from providers.

“Unless there are extenuating circumstances, the ‘loss’ a client suffers from these delays is the loss of investment growth and that only happens once the investments are sold and are sitting in cash, and I’m certainly not seeing that happen for 28 days plus.

“It can of course go the other way too - I recently had a defined benefit transfer which took four months, and as frustrating as it was due to market movements the client was actually better off.”

maria.espadinha@ft.com