A group of some of the UK’s largest master trusts have formed Pathfinder, a steering group aiming to explore ways to improve pension transfers for members and support a more scalable transfer process across the sector.

The eight defined contribution (DC) master trusts represent more than £162.7bn in funds under management across 14.5 million savers, and include People’s Pension, Smart Pension, Nest, and Now:Pensions.

They are seeking to explore how pension transfer infrastructure can be modernised, including the use of open, interoperable standards that would establish a common set of rules that enable master trusts, administrators, and technology parters to exchange information consistently.

Master trusts will be given a forum to review practical transfer activity, share operational learnings, and assess what could be required to support more efficient transfer journeys in the workplace pensions sector.

The establishment of Pathfinder followed the completion of the UK’s first inter-master trust transfer using open standards in April, which used ISO 20022 messages over the Swift network.

Pathfinder is exploring earlier and better pre-transfer validation using open standards, as earlier validation is expected to help identify data discrepancies or reasons for rejection before a transfer progresses too far.

Other master trusts have been invited to join Pathfinder to help shape a practical approach to improving pension transfers.

“As an industry we are always looking for ways to improve our members’ experience, and this includes during transfers,” said Now:Pensions CEO and Mercer UK head of DC product, Patrick Luthi.

“We support the work of the group to investigate if open standards could provide better outcomes for members. This is especially important considering the potential increase in transfers under the small pot consolidator because of the recently passed Pensions Schemes Act.”

Smart Pension chief operating officer, Sue Whittington, argued that master trusts needed transfer processes that match the scale and expectations of today’s market, and the expected increase in transfers in the near future.

“We’re delighted to be taking this forward, collaboratively, with our industry peers, delivering a solution shaped by the industry itself,” she continued.

“Pathfinder has shown that open standards can work through a live transfer, with further transfers already underway.

“It has also shown that there is a way to improve the transfer process, by better supporting saver engagement with increased transparency and completion rates.”

People’s Pension chief operating officer, Angela Staral, added: “This pilot project represents a promising first step in assessing open standards as a way to improve DC pension transfers.

“It is important to recognise that transferring a pension is fundamentally different from switching bank accounts, as the decisions made can have long-term implications for retirement outcomes.

“That said, once savers have made an informed choice, the process itself should be as simple and efficient as possible.”

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