DC pension transfer volumes bounce back to pre-Covid levels as transfer times slow

Defined contribution (DC) pension transfer volumes have “bounced back” from the initial impact of the Covid-19 lockdown, and are following a “steady upward path” towards pre-lockdown levels, according to the latest Origo Transfers Service data.

The figures showed that whilst volumes fell through April and May as the industry and consumers alike reacted to the UK lockdown, they have picked up since June, following an upward trajectory though Q3.

It also noted that whilst overall transfer volumes for DC pensions were rising steadily throughout 2019, hitting a consistent high between Q3 2019 and Q1 2020 of around 200,000 per month, the current increase is rising at a “steeper rate” than was seen in 2019.

Commenting on the data, Origo managing director, Anthony Rafferty, said: “The steady rise in transfer volumes is good news for the industry, reflecting that following the start of the crisis in March, when consumers and the industry were adapting to the initial imposition of lockdown, business is picking up again and volumes are fast heading for pre-crisis levels.”

However, the Origo Transfer Index also showed that average pension times took “marginally longer” to complete for the year to the end of Q3 2020, with an average time to effect a ceding transfer of 10 calendar days, compared to the 9.4 days recorded in Q2.

Meanwhile in simpler cases, the average ceding time rose to 7.6 days, compared to 7.3 days at the end of Q2.

Furthermore, from the end of Q1 to now overall average transfer times have risen by 1.2 calendar days, while average performance for simpler cases has increased by 0.6 days.

Rafferty noted that whilst a dip in transfer volumes following the onset of lockdown has allowed organisations to maintain transfer times, increases in Q2 transfer volumes have coincided with the increase in ceding times

However, he emphasised that this is still a testament to the efficiency of providers’ systems and operations under extreme circumstances.

He added: “It also reflects the benefits of automation and digitisation of processes within financial services. Imagine the impact of the coronavirus crisis on a paper-based system.

“I believe the crisis will act as a catalyst for the greater adoption of automation and electronic services, driven by a potent combination of operational efficiency, cost, business continuity and consumer demand.”

However, Freshfields Bruckhaus Deringer has recently warned that trustees and administrators could be facing increased risks around the timing of pension transfers, following a decision from The Pensions Ombudsman.

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