We need to talk about transfers.
Over the past month there has been a flurry of activity regarding how the industry can best improve the time it takes to transfer from one pension provider to another.
Current legislation stipulates that you have six months to complete a transfer between occupational pension schemes, while actual average times range from around 50 to 55 days. This is obviously too long.
There is clear industry consensus that transfer times must be shortened to provide consumers with the best experience. After all, consumers can already transfer funds between bank accounts at the click of a button. However, the industry is pulling in different directions over a possible solution.
On the one side, you have the government-backed initiative Star, tasked with developing a framework specifying three weeks for an occupational pension transfer through legislative change that opponents say is simply too long.
The task force has been accused of being another ‘pay-to-play industry body’ that will take years to implement legislation without any assurances that the ‘big players’ will sign up.
Taken face value this looks to be true, but in reality, Star is only as strong as the members that sign up to it, so why not pull together to make it work? And besides, legislation will take a long time to be put in place anyway.
In a brazen attempt to nudge the industry towards improving times, Origo published the transfer times of 27 out of the 100 firms that use its digital transfer service, hoping that by taking the first step towards transparency, others will follow.
What the results did show is that there is another way the industry can go. The overall average ceding transfer time was 9.3 days, ranging from five days for Canada Life and NFU Mutual to 29 days for Hargreaves Lansdown – surprisingly quick in my eyes and a great demonstration of the power technology can have – but which route do we now take?
One commentator described the current situation to me as like going to church, those inside the chapel all want to go in the same direction, it is those outside who really need to see the light.
This refers to the ‘big three’ of Mercer, Willis Towers Watson and Aon.
It is clear they are singing from a different hymn sheet to the rest of the industry when it comes to being held accountable for the improvement of pension transfer times.
The Department for Work and Pensions has rightly been on the case of these big players, who have repeatedly shrugged off invitations to improve and have failed to offer any reasonable explanation on why this is the case.
Having asked the large third-party administrators myself, I understand just how tricky it is to get a straight answer. ‘We are thinking about joining Star’, they say, with no explanation as to what it is exactly that is stopping them.
Having heard first-hand accounts where it is simply too lengthy a time for members, who could then be at risk of a substantial financial loss as a result, it is something we must work together to improve.
If the Star initiative really is the best possible chance the industry has of changing legislation, forcing firms to do something about the time it takes to transfer between schemes, then the industry had a responsibility to back it. There is strength in numbers.
BLOG: Industry must unite over transfers
We need to talk about transfers.