There has been a 31 per cent increase in switching times, rising from an average of 10.7 days in 2020 to 14 days in 2022, according to PensionBee’s analysis of Origo’s Pension Transfer Index.
The analysis found the vast majority of pension providers included in Origo’s most recent index have increased the time it takes to process switching requests over the past two years.
PensionBee said despite slow switching times being identified as a problem by the Financial Conduct Authority back in 2015, the issue remains prevalent among a number of key players.
This includes The People’s Pension, whose average times doubled from 2020 to 2022, reaching 39.5 days; closely followed by LV which recorded an average time of 36 days and Nest at 21.8 days in 2022.
Kevin Martin, director of customer services at the People’s Partnership, said: “The issue of transfer times is one we take incredibly seriously and have worked very hard on to improve.
“Not only have we recruited more specialist staff but we have invested in technology, which have both significantly improved the transfer journey for our members. We expect to see continued improvement in our transfer times throughout this year.”
Martin added: “This has been an industry-wide issue that has been caused, in no small part, by the introduction of the red flag system, which is a necessary safeguard against pension scams.”
Origo’s quarterly transfer index publishes the ‘transfer out’ times of 28 companies in the pensions market.
Participation in the index is voluntary and is published to enable greater transparency within the market and so help drive down the time it takes to switch a pension across all pension providers.
A large number of providers and third-party administrators continue to not participate in electronic pension transfers or publicly disclose their transfer times on Origo or elsewhere, showing limited engagement in the industry’s efforts to improve transfer efficiency for consumers.
Anthony Rafferty, CEO, Origo, said: “While it is natural for businesses to focus on the onboarding of new clients and servicing of existing clients, the efficiency of the industry is perhaps best marked by how businesses respond and serve clients/customers who want to transfer out of the business, for whatever reason.
“The speed of transfers reflects upon the efficiency of the industry to deliver a quality service and the support that clients/customers require when making decisions on their finances, even where that is to transfer out.”
The average time to transfer client money out across the group decreased from 14 to 13.7 calendar days .
Rafferty added: “Where administrative operations remain manual is where we see some of the greatest inefficiencies in the industry. Another example is the letter of authority process.
“This is where a client has to sign a document for their adviser to be accepted by providers as their authorised adviser, and so able to transfer money out of that provider. The process has developed over the years into a convoluted, still mainly paper-based process which can see clients often waiting months for providers to accept their authorisation.”
He explained that using a digital, automated system for transfer administration of all kinds is now where every provider in the industry needs to be – in particular with the forthcoming consumer duty regime, where the regulator’s focus will be on client/customer support and its effect on outcomes.
PensionBee data
Elsewhere, PensionBee’s own pension switching data revealed that providers that have chosen not to join Origo and/or do not process transfers electronically, such as large pension administrators, operate with extremely lengthy times.
XPS Administration recorded an average time to PensionBee of 57 days in 2022.
Gary Davies, operations director, XPS Administration, said: “The regulations which came into force in 2021 are about protecting members from the ever-increasing prevalence of scams, which led to increasing timescales for transfers.
“Under the regulations, many transfers require a call with MoneyHelper before they can be paid, which can delay the process.”
Davies said XPS is actively working with government and industry partners and providing regular data on its experiences to seek a change in the regulations that would make routine transfers operate more smoothly.
“Until those amendments are made, we will continue to abide by the regulations as they are written,” he said.
Meanwhile, Mercer took on average 33 days, Capita 32 days, Willis Towers Watson 26 days and Aon Hewitt 24 days in the same year.
A Mercer spokesperson said: “As a pension scheme administrator, Mercer requires information and instructions from various third parties (such as the scheme trustees, actuaries, insurers, member financial advisors) to carry out a number of its services, including transfers.
“On rare occasions there can be delays receiving this information but, in all circumstances, Mercer outlines its processes to members and points to where they are at within any process to ensure member expectations are managed accordingly.”
In contrast, PensionBee said it has consistently taken an average of 10 days to complete a pension transfer request over the same period, as is in line with its proposed ‘pension switch guarantee’ which would ensure switching providers is a quick, efficient and secure process which happens electronically within 10 days.
Becky O’Connor, director of public affairs at PensionBee, said: “It’s very concerning to see a sharp rise in pension transfer times.
“This latest data proves just how crucial it is to move away from self-regulation within the pensions industry and instead implement a ‘10-day Pension Switch Guarantee’, a time frame the Financial Ombudsman Service is already independently enforcing.
“This is essential to help restore confidence and trust in the pension system, allowing consumers to take control of their financial future and plan ahead for a happy retirement.”
sonia.rach@ft.com
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