The first rule of capitalism is to understand the plumbing. Nothing determines outcomes more than the complex system of pipes and valves through which money and assets flow. Not to mention the blockages, leaks and hidden channels that divert them in unintended directions.<\/p>\n
Nowhere is this more apparent than in the humdrum but opaque world of pension transfers. An increasingly tetchy row has sprung up between the traditional pensions industry and the disruptors trying to grab their customers.<\/p>\n
On the one hand are the mature traditional pension schemes, insurers and pension administrators. On the other is a fast-growing group of direct-to-consumer platforms such as JP Morgan Personal Investing, Moneybox, Vanguard, AJ Bell, Hargreaves Lansdown and Monzo.<\/p>\n
Nine of these new kids on the block have combined to issue a damning report on Thursday that accuses the incumbents of deliberately dragging their feet to prevent customers transferring their pension pots to the new platforms.<\/p>\n
In the normally polite world of pensions, the gloves have come off. The worst offenders are being accused of prolonging and exploiting an \u201carchaic\u201d system and deliberately employing \u201csludge tactics\u201d to slow transfers out, disadvantaging the departing customers and stopping competition working as it should.<\/p>\n
Consumers who have ever tried to move their pensions know all about this. Some transfers go smoothly, but some incumbent providers seem to seize on any excuse to obstruct the process. Just extracting a policy number from them can take weeks. Transfer requests are subjected to the most pettifogging of due diligence processes. If not perfectly complied with, the computer says no. Applicants can be required to fill in incredibly complex forms requiring answers they cannot possibly know. Many give up at this point, even if the call-centre purgatory of password checks and automated messages hasn\u2019t already finished them off.<\/p>\n
Another preposterous delaying tactic frequently used by incumbents is to block transfers on the grounds that the receiving platform has (shock horror) overseas investments \u2014 shamelessly misusing or misinterpreting a rule set by the Department for Work and Pensions.<\/p>\n
Another is to apply exactly the same level of distrust to a transfer going to the most blue-chip regulated platform as to the spivviest-looking unknown recipient. Many do not have so-called clean lists of pre-cleared receiving firms.<\/p>\n
The ancient technology used by some incumbents does not help either. Some insurers have not moved from a paper-based system requiring \u201cwet signatures\u201d and needing a postal service for sensitive documents far more reliable than anything Royal Mail can manage.<\/p>\n
The delays all make sense for the surrendering firm and its administrator. Every week they carry on running someone\u2019s pension provides them with more fees. It also feeds the helpful suspicion that transferring out is just too much trouble.<\/p>\n
Adding to the problem are the regulators who quite like the process to be cumbersome and protracted because it makes it harder for scammers. The Financial Conduct Authority has spoken approvingly of \u201cappropriate friction\u201d in the system.<\/p>\n
That makes sense for transfers out of defined benefit pensions, where savers may be sacrificing both retirement certainty and valuable benefits. But it is much less of an issue for defined contribution pensions, which are the norm now for most people.<\/p>\n
The disruptors argue the caution has gone too far and is paralysing the system. The statutory maximum time frame for pension transfers is still an unbelievable 180 days. That compares with the deadline for current account switches of seven working days and Isa switches of 15-30 working days.\u00a0<\/p>\n
Things seem to be getting worse. PensionBee, the listed pension consolidator and one of the nine calling for reform,\u00a0will shortly publish a new table of, in its view, the worst offenders, scored by average transfer times. It takes in 40,000 pots a year so has a good view of what is happening on the ground.<\/p>\n
Cushon, the master trust recently sold by NatWest to Willis Towers Watson, XPS, the FTSE 250 pension administrator, and the administrator Capita all come out very badly and their average transfer times actually worsened last year.<\/p>\n
XPS seems a particular culprit, according to PensionBee. On XPS\u2019s own figures it is now designating 96 per cent of all applications as potential scams. That may or may not be good for identifying fraudsters; it\u2019s certainly no fun for those simply wanting to change their provider.<\/p>\n
This is not a universal problem. Big names like Aviva, Standard Life and Royal London all score well for speediness in PensionBee\u2019s new league tables, suggesting that it is perfectly possible to turn transfers around in less than ten days. It is the specialist administrators, which provide an outsourced service to workplace defined contribution schemes and are usually unregulated, that score worst.<\/p>\n
Without reform, confidence in the creaking, impossibly complex private pension system is going to get worse. The launch later this year of the pensions dashboard, a government-backed project to enable savers to see all their pensions on one web page, is going to shine a spotlight on the problem.<\/p>\n
About \u00a3800 billion is invested in private pensions in the UK. It\u2019s a big fees prize to gain for the disruptors and a painful one to lose for the incumbents.\u00a0<\/p>\n
There are two other topical reasons why ministers might want to grasp this nettle. Consumers transferring to the new platforms are considerably more prone to \u201chome country bias\u201d than the incumbent pension schemes they are leaving. More switching would nudge more investment into UK-listed companies.<\/a><\/p>\n The disruptors are also far better than the incumbents on explaining and communicating the stock market to savers, another priority for this government as it aims to improve retail investor engagement.<\/p>\n For all kinds of reasons then, this is a blockage in the pipework that needs a good heave-ho on the plunger.<\/p>\n Patrick Hosking is Financial Editor of The Times<\/p>\n","protected":false},"excerpt":{"rendered":"The first rule of capitalism is to understand the plumbing. Nothing determines outcomes more than the complex system…\n","protected":false},"author":2,"featured_media":530627,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[45,49,48,133,131,132],"class_list":["post-530626","post","type-post","status-publish","format-standard","has-post-thumbnail","category-personal-finance","tag-business","tag-ca","tag-canada","tag-finance","tag-personal-finance","tag-personalfinance"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/530626","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=530626"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/530626\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/530627"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=530626"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=530626"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=530626"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}