A collaborative industry approach, technology and improving documentation standards could improve the defined benefit transfer experience, Origo has said.
According to a new white paper from Origo, DB transfer volumes and processing issues are causing delays for members as well as raising costs and risks for pension schemes.
The research, carried out by the fintech company with 16 third-party administrators (TPAs) and employee benefit consultants (EBCs), highlighted that there had been a significant uplift in requests for cash equivalent transfer values (CETVs) of up to 135 per cent and further record increases in pension transfer volumes of up to 100 per cent. This trend is expected to continue to grow once pensions dashboards are introduced in 2019, Origo noted.
With the regulatory timeframe, as mapped by The Pensions Regulator (tPR), for a DB transfer being nine months, TPAs and EBCs indicated that one of the most commonly cited “frustrations” and hindrances to faster transfers was a “bottleneck” which is caused by inconsistent and constant data requests from IFAs. This was explained to be caused by a lack of experience among IFAs in dealing with DB transfers and therefore leading them to request data deemed “irrelevant”.
The research noted that to deal with these issues, many schemes have implemented short-term coping mechanisms such as involving additional staff and temporary team structures to deal with the demand, over-reliance on spreadsheets to quicken calculations and compiling lists of schemes that are seen as being safe for transfer.
As a result, Origo has suggested that a better transfer experience could be achieved via the adoption of industry agreed standards and technology.
Origo stated: “To remove the disconnect between TPAs/EBCs and IFAs the creation, agreement and maintenance of a standard data set or message/electronic form, for example, could remove the constant toing and froing between parties and speed up the early transfer stages. Due to increased volumes, attempting to meet the three month quote guarantee deadline is becoming even more challenging. Such a standard at this stage of the transfer process would help cut costs, reduce errors and help ensure timely transfer requests. Reducing paperwork from the transfer process would also help to improve transfer times.”
Origo managing director Paul Pettitt said: “What our research reveals is an industry under pressure, working in silos, each with different views of their regulatory commitments and counter-party data requirements, and so expectations of what is needed, what can be achieved and by when are very different. This is resulting in increasing frustrations, spiralling administration costs and poor member experience. It is an issue that needs to be tackled sooner rather than later.
“Origo, is urging the industry to recognise the burdens and issues within the DB pension transfer process and the impact it is having on administration costs and poor member experience and for there to be a collaborative industry approach to solve these issues.”