Most firms complete pension transfers in a reasonable timeframe, the Financial Conduct Authority (FCA) has said, although it has raised concerns over switching incentives, warning that some consumers may not be considering the “full financial implications” of their decisions.

In its multi-firm review of life insurers’ pension transfer processes, the FCA found that ceding schemes generally processed most transfers promptly, with more than three-quarters of sampled firms completing all requests within an average of 20 days.

For transfers where additional steps and checks were carried out, half the firms in our sample took between 41-80 days to complete these transfers on average, with the rest taking between 26 and 160 days.

The FCA found that transfers were typically faster when both ceding and receiving schemes used digital platforms rather than manual, paper-based processes.

The regulator stressed, however, that some transfers still took longer than expected, cautioning firms to avoid “foreseeable harm” from poor or slow service.

It also emphasised the need to protect consumers from scams and ensure transfers do not cause other forms of harm.

The findings come amid growing calls for a statutory pension ‘switch guarantee’, as PensionBee launched a national petition urging the government to introduce a legally enforceable 10-day switch guarantee, citing recent research showing that 46 per cent of consumers who had transferred a pension found the process difficult.

Indeed, PensionBee chief business officer (UK), Lisa Picardo, welcomed the FCA’s review, noting that it set out clear expectations under the Consumer Duty, but reiterated the need for a switch guarantee.

“Through our ongoing 10-day switch campaign, we’re calling for faster, electronic transfers to be made standard, alongside a reformed scam-prevention framework that protects savers without slowing legitimate transfers,” she said.

The provider also called for clearer, jargon-free communication and proportional scam-prevention rules that do not block genuine transfers.

However, there are concerns aside from timing, as the FCA’s report reiterated long-standing worries that some consumers may transfer primarily to secure short-term rewards, such as cashback, without fully weighing up the long-term implications.

“We recognise the efforts firms already make to flag to customers the often-valuable benefits of their existing scheme,” it said, adding that the firms in its sample shared concerns over cash-based switch incentives.

Quilter head of retirement policy, Jon Greer, echoed these fears, warning that many savers remained "unaware" that transferring could mean giving up valuable benefits such as higher tax-free lump sums or earlier access to benefits, depending on scheme rules.

Calls to ban pension switching incentives have also intensified following research by People’s Partnership and the Behavioural Insights Team (BIT), which found that a £100 cashback offer made participants 20 per cent more likely to transfer their pension - even when higher fees in the new scheme would leave them more than £1,000 worse off after five years.

The FCA also revealed that amber flags - which pause a transfer for further checks - were applied to fewer than 2 per cent of transfer requests in its sample.

These were typically triggered when the receiving scheme included high-risk or unregulated investments, charges were unclear or high, or overseas investments were involved.

Greer welcomed the reduced incidence of amber flags being raised solely due to overseas investments, calling it “a positive thing” that suggested progress.

However, he warned that interpretations remained "inconsistent" and that the review excluded trust-based schemes, where this practice is likely more common.

“This is not an issue we would say has been fixed per se, and further investigation is definitely required to help ease the friction this causes,” he added.

Looking ahead, the FCA confirmed it would publish feedback and consultation proposals from its December 2024 discussion paper, titled 'Pensions: Adapting our requirements for a changing market in due course.'

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