Pensions minister Guy Opperman has pledged to publicly name providers who do not sign up to the Star initiative's 21-day pension switching pledge.
Mr Opperman (pictured), minister for pensions and financial inclusion, yesterday (August 15) urged providers to be transparent with their switching times and to commit to lowering them to provide a better service for consumers.
This came after government scheme Nest, which administers 8m pension pots, signed up to the Star initiative and committed to keep its switching time on defined contribution schemes to less than 21 days.
According to the Origo transfer index, published in July, Nest’s average switching time is 12.2 days.
Mr Opperman said: “This is great news and overdue. Nest looks after the pensions of millions of people brought into retirement saving by automatic enrolment, so clearly it is important they send a message to the rest of the industry.
“Others need to act urgently to join them and show that they care about their customers, or face being ‘named and shamed’.”
Both consumers and advisers can find switching difficult because of the time, complexity and cost involved.
Therefore consumers may end up staying in pension products or on platforms that no longer meet their needs or are poor value for money.
Star was formed in October to define the processes required to complete a transfer between defined contribution schemes.
It is a partnership between Criterion and TeX which works on delivering the Transfers and Re-registration Industry Group framework and proposed a 14-day maximum limit for cash transactions and 15 days for occupational scheme transfers.
It also sets good practice targets for these transactions and credits firms in the industry that are performing well.
The first meeting of the Association of British Insurers-hosted pensions working group is due to take place next week (August 22).
This will see more than 30 organisations discuss what can be done to develop best practice in the pensions industry and to further reduce switching times.
Mark Rowlands, Nest’s director of customer engagement, said: “While we’ll continue to offer quick transfers, we also want savers to have clear and easy to understand information to help them make informed decisions about their pension scheme – from transfer charges to how the scheme operates, from future investment prospects to past fund performance.
“We are looking forward to working together with colleagues across the industry to influence how good-practice is defined. Reducing transfer times is an industry-wide challenge and one we’re eager to be involved in.”
Tom McPhail, head of retirement policy at Hargreaves Lansdown and chair of the Star steering committee, said: “We are delighted that Nest Corporation is supporting the Star initiative, bringing with them such a high volume of consumers’ pensions.
“Frankly the more organisations that become involved, the firmer our foundations are and the more momentum we have.”
According to the Origo Transfer Index, Hargreaves Lansdown was the provider which took the longest to process a pension switching request in the year to June 2019, at 30.5 days on average.