The pension transfer system is “not fit for purpose” and holding back the potential economic benefits of digital pension platforms, according to a cross-industry group of digital platform providers.

AJ Bell, Freetrade, Hargreaves Lansdown, Interactive Investor, J.P. Morgan Personal Investing, Moneybox, Monzo, PensionBee, and Vanguard commissioned a report to assess the current state of the pension transfer system.

It argued that a modernisation of the ‘plumbing’ of the pension sector was “fundamental” to ensuring improved retirement outcomes and realising the economic growth digital pension platforms could provide.

The analysis estimated that the direct-to-consumer digital pension sector would contribute £9.1bn to the economy by 2055 through higher productivity and £9bn through increased pensioner incomes.

The providers said that the 180-day statutory limit on pension transfers was “out of touch” with the rest of modern finance, and called for the transfer deadline to be reduced to 30 working days.

Furthermore, they accused legacy providers of using ‘sludge’ practices, such as requiring signatures on paper forms, to delay transfers, and of misusing anti-scam legislation, such as the scam flags system.

The report called for the introduction of a ‘digital-first’ presumption that made manual paperwork the exception rather than the rule, and a ‘due-diligence checklist’ to provide transparency on the reasons for blocking transfers.

It also recommended that a ‘pensions tax roadmap’ should be introduced to avoid speculation that precedes government Budgets.

With the government and industry preparing for the launch of pensions dashboards, the providers warned that increased visibility without a modern transfer system would lead to consumer frustration.

"The overall customer experience is only as good as the slowest innovators, and savers should not still be relying on paper processes in 2026,” commented Moneybox director of personal finance, Brian Byrnes.

“For too long, legacy providers have lagged in adopting innovations that improve saver engagement and outcomes.

“The Financial Conduct Authority must look beyond headline statistics and examine why pension transfers so often stall.

“There are cases where providers flag ‘overseas investments’ while offering the same global tracker funds themselves, raising questions about whether these flags are being used to frustrate legitimate transfers and retain customer funds."

AJ Bell director of public policy, Tom Selby, argued that the development of the pensions landscape was at a pivotal crossroads, and decisive policy action had never been so important.

“Government, regulators, and the pensions industry need to work together to tear down any existing barriers to support the government’s retail investing drive and turn Brits from savers into a nation of investors,” he continued.

“Driving down transfers times across the market is essential, as is aligning the regulatory approach for retail and workplace pensions so we can deliver better outcomes for investors and support the UK’s retail investment ambitions.”

Hargreaves Lansdown head of retirement analysis, Helen Morrissey, added: “The pensions market is changing and personal pensions have a growing role to play, helping people take control of their savings, and understanding how to build for the retirement they want.

“Regulation should support this end with transfers taking days not weeks. The current pension transfer system is woefully out of step with wider financial services.

“Longer term we would like to see government revisit the Lifetime Pension Pot set up which allows people to choose which provider receives their contributions.

“It’s a step that enables people to keep track of their pensions and could be a gamechanger in how people engage with them.”

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