Advisers reveal litany of woes over pension transfers

Service levels, which some argued had improved during 2020, seem to have fallen over the past 12 months, making it difficult for advisers.

Tom Kean, director at Thameside Financial Planning, said: “It’s a never-ending issue for us and, having spoken to other advisers, them as well. It’s always been like this though; it just gets slightly better or slightly worse over the years. 

“Having worked at a large provider in my youth, I have some kind of insight as to why this happens. Providers allocate just enough resources to the problem and juggle the inevitable negativity if that isn’t quite enough.”

Kean said although it makes everyone’s life a “misery”, it's down to costs and productivity.

“I’ve always said that working from home makes this kind of work more “sticky”, and I fear that the trend for WFH is the current culprit.”

However, Darren Cooke, chartered financial planner at Red Circle Financial Planning, said: “I am not sure where service levels improved in 2020. 

“Generally, they got worse during the pandemic as companies were not prepared for home working by staff.”

Cooke said since then, it has not gotten any better, arguing that it shouldn’t matter whether staff are still working from home or back in the office. 

“I don't think this is a people problem, it's a systems and IT problem,” he said.

“Where staff issues do happen, it is because they are not properly trained or don't have the knowledge and experience. 

“We increasingly find that staff at legacy providers simply don't understand their own products, particularly the older plans, which often leads to incorrect information being given out.”

Cooke gave the example of one case, where there was a very old plan from the early 90s that had a quite complicated structure. 

“Thankfully we did speak to the one lady who was able to explain it because she had been there that long,” he said.

“She told me she was due to retire soon so nobody else would understand these policies. She had told her boss, but he didn't care.

"He had no interest in her passing that information on to another person so they would have somebody still working there who knew how that policy worked.”

Administrators’ response

Companies involved in facilitating transfers have spoken of the sheer number of enquiries each month. 

A spokesperson for Willis Towers Watson said the firm was committed to delivering the “highest standards of service to occupational pension scheme members, policy holders and clients”. 

“We receive tens of thousands of enquiries every month and complete the vast majority quickly and within appropriate timescales, while providing members with accurate and up-to-date information to help them make important retirement decisions,” the spokesperson said.

“Transferring benefits from trust-based pension schemes with a mixture of DB and DC, which is a large element of what we do, is always more complicated and time intensive when compared to transfers between contract based DC schemes. 

“However, we constantly strive to enhance our service and apologise for any unnecessary delays experienced.”

It can, at times, take 15 to 20 working days for ceding schemes to simply place our letter of authority on file.Dominic James Murray, Cameron James

There are also many parties involved with transfers, and differences in the process with each individual scheme, which can lead to varying turnaround times. 

A Mercer spokesperson said: “As a pension scheme administrator, there are differences in approach and processes relating to DC and DB transfers which in turn drive different timescales for completion.  

“However, with all transfers, some of the controls and processes we undertake are reliant upon information and instructions from various third parties (such as the scheme trustees, actuaries, insurers, members, financial advisers). 

“On rare occasions there can be delays receiving this information but, in all circumstances, Mercer seeks to keep affected members updated.”

LOAs

But transfer timescales are not the only issue that advisers are battling with.

For some time now, letters of authority have been the bane of many advisers’ lives.

Cooke said this was another recurring issue as companies are sending out 'standard' information packs in response to LOAs which don't actually tell you everything they need to know so advisers end up having to go back and chase them. 

“That wastes our time and theirs,” he said. “This really would be very easy to fix. 

“That's before we start on the transfer process. When the new rules to try and prevent scams came in nearly all providers went over board and put stops on transfers even to reputable companies.

“That seems to have calmed down a lot now and a more sensible, pragmatic approach is taken by most but by no means all. Some still 'red flag' perfectly innocuous transfers and delay them. “

Speaking to FTAdviser, Dominic James Murray, chief executive and IFA at Cameron James, said ‘sludging' is a very real "silent issue" in the UK pension transfer industry from both defined benefit and defined contribution scheme providers.

“It can, at times, take 15 to 20 working days for ceding schemes to simply place our letter of authority on file. 

“When clients give guaranteed CETVs that are expiring, these ridiculous LOA timelines can eat a whole month of the permitted FCA timeline that our clients have to take advice regulated and authorised advice.”

Murray argued this is unfair for DB members trying to make one of the most important financial decisions in their lives. 

“Why should they be forced to make last minute decisions in the final week of their CETV because their scheme took a month to add an LOA and/or provide any necessary or missing information?” he said.

“These service levels are simply not acceptable in my opinion in 2023, when technology and systems have moved on dramatically.”

It has gone too far and been unchecked. I truly hope the FCA's consumer duty regulations put an end to the largely diabolical service that many UK pension schemes provide to clients and/or the appointed financial adviser.Murray

He explained that some schemes still provide “huge friction” to a transfer advice process by requesting all paperwork either signed originally or even worse signed and posted to the scheme in original format.

“Most clients no longer have printers at home, and paperwork remains a stress that they need to administer and go to their local post office,” he said. 

“Some busier clients with a professional career have not been to a post office in many years and find this extremely frustrating.”

He added: “We have to ask, when the FCA, HMRC and UK Courts all typically accept electronic signatures such as DocuSign, why do these ceding schemes deny clients and make it so tough? 

“Based on what regulation are electronic signatures not a valid and legally binding document. Unfortunately, at best, I believe the answer is sheer incompetence and an unwillingness from schemes to update. 

“At worst, a pre-mediated complicated system designed to slow transfers down, or put clients off and thus maintain AUM.”

‘Sludging is real’

Last week, FTAdviser’s editor Simoney Kyriakou wrote a story focusing on 'sludging' - the practice by which companies make it hard for ordinary people (and even advisers) to switch to a new provider or product.

The Financial Conduct Authority has been keeping an eye on this for many years and it is an area of focus for the regulator when it comes to the incoming consumer duty regulations.

The regulator has already said it is publishing research on sludge practices and is considering "potential approaches that we may use in our supervisory work to investigate them".

Commenting on the story, one adviser commented stating that training at many companies who promote engagement “is woeful with inaccurate or wrong documentation being issued”.

Murray explained that as a result of these time consuming issues, Cameron James have had to create an entire transfers department at his firm with five full time salaried staff whose “single daily task is calling the schemes and sitting on hold for up to 60 minutes at a time to 'chase' pension information required for a client's report”. 

“It was simply no longer feasible for our financial advisers to continue these administration tasks as it took them 2-3 hours per day, when they should be focused on providing advice to clients.”

He argued that something serious needs to be done to address these timelines from UK pension providers. 

“It has gone too far and been unchecked. I truly hope the FCA's consumer duty regulations put an end to the largely diabolical service that many UK pension schemes provide to clients and/or the appointed financial adviser."

He added: “Unfortunately, I feel that many of the UK schemes are not correctly re-investing in their technology infrastructure systems and instead see existing members as cash cows that will never leave.”

On a more positive note, Philip Martin, managing director at Unique Financial Planning, argued that not all the providers that are causing these frustrations.

“We see a mixed picture, with some companies like Scottish Widows, Royal London, Aegon and Zurich regularly providing good quality information in a timely manner, but others such as Nest or Prudential - at least in our current experience - are delivering appalling turnaround times and patchy accuracy.

“One can only wonder how these businesses can meet their consumer duty obligations without a hard examination of the service they are providing clients and advisers.”

FTAdviser contacted Nest and Prudential for their comments but did not have a response as at time of publication.

sonia.rach@ft.com

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