We’ve had fuss about how hard it is to move your bank account, we’ve had fuss about how hard it is to switch utility supplier, but how hard is it to merge your pension accounts so that your pot follows you from job to job?
It all depends on how efficient your pension provider is in managing the “transfer-out” of funds and – believe it or not- some pension providers not only make it operationally difficult, they still can charge massive exit penalties. If you want to see evidence – you can link to Pension Bee’s website. If you want to find out more from Pensions Bee, then you can read their blog on the matter here.
Pension Bee are a fintech led by an ex Goldman Sachs whizz Romi Savova.
They have analysed over 1800 recent transfers they have executed for ordinary savers who have come to their site to bring their pots together. As soon as they read their research I cycled down to their South London HQ to get the full picture. This is not the full picture- the full picture is much worse- but more of that later!
 AMC: annual management charge; electronic: using industry platform Origo; manual: paper transfer forms
 PensionBee’s fee transparency rating: 5 = very good. Fees visible on the paperwork. 4= generally good. Enough information given to calculate fees from the paperwork fast. 3= spotty. Requires a calculator. 2 = leaves a lot to be desired. Requires a calculator, a google search and occasionally a phone call. 1 = not available unless specifically requested over post or extremely complicated to calculate from available info.
 The charge is calculated as a proportion of the pension pot and where the charge exceeds the pension pot – i.e. is over 100% – it is expected to result in an extinguishment (account closure) of the pot.
 All data for Now:Pensions is based on deferred members (i.e. those not paying in contributions) earning over £18,000. Active members are subject to different fees and charges. Fees as a % of the pension will be lower as the pension pot grows through contributions.
Why does this matter?
Well it shows that your chances of getting your pot to follow you (at a reasonable distance) diminish the further you go away from a hard core of insurers who have a reasonable service standard of 12 days. These insurers use the Origo clearing service which Pension Bee says is working fine.
Where the problems lie, is with the third party administrators who do things for providers (clearly at their own pace). These include
Tata consultancy services – NEST
Jardine Lloyd Thompson (JLT) -NOW
Willis Towers Watson – WTW Lifesight
Capita – Capita Atlas
Aon Hewitt – Aon Hewitt master trust
(If you want something done slowly – use an established actuarial consultancy and their admin!).
This matters because people expect better, because money that sits around for 50 days is not being invested as the member wants and because these delays are bringing pensions into disrepute!
It’s no wonder people feel so remote from their money, if it takes them 50 days+ to move it!
NEST v People’s pension
NEST – it would seem -operate a lipstick on a pig pseudo digital service which requires the member to download and print-off a transfer form which then has to be sent by post from one party to another! What is this about? NEST tell me they want to be 100% digital but that noble aim seems to be abandoned when a member wants to transfer away – funny that!
Peoples – who are another occupational pension scheme, subscribe to Origo and are obviously doing a great job.
It makes a difference
Perhaps someone could tell NEST, NOW, WTW, Aon, Capita and I suspect Mercer who also administer their own master trust but didn’t have any TVs through Pension BEE in this period.
My friends at Quietroom tell the story of how they staunched outflows from Halifax Bank during the 2008 banking crisis. The Bank had put up barriers to exit (sounds familiar?) and this was not working. Quietroom tore down the barriers and the transfers dried up. I suspect that if you want to prove yourself worthy of being a long-term pension provider, you show the confidence to let people walk away easily.
I suggest that a few of the TPAs with 50 day turn-a-rounds, have a word with Quietroom!
Independent corroboration from Hargreaves Lansdown.
Coincidental to the publication of Pension Bee’s Robin Hood index, Hargreaves Lansdown’s Tom McPhail was in the press citing the same conclusions from work he and others are doing in a joint ABI/PLSA working group.
The group is finding it is the GPP and SIPP providers using Origo and similar clearers who are delivering the goods, while occupational pensions (including the master trusts) are lagging (turn around times quoted are similar to those of Pension Bee’s survey.
What this means?
As a result of this research, www.pensionplaypen.com will be revising its metrics to accommodate a further score on provider’s performance in transferring out funds.
Employers and members need to know that they can take their money from one master trust to another or from master trust to GPP or SIPP within reasonable service times.
We have already contacted some of the worst performing providers about their behaviour and will be writing to both the trustee chairs and IGC chairs where problems are obvious. This includes writing to organisations where high exit fees persist
Once more the master trust assurance framework, which is supposed to be ensuring good administrative practice is shown to be a chocolate tea-pot. TPR and ICAEW please note. We will be writing to tPR and ICAEW asking how they square MAR certification with the results achieved by most of the master trusts.
Pension Bee have also alerted us of particular problems with one insurer who seems to be putting up the shutters on all transfers out – more on this to come.
If you have a horror story of a DC to DC transfer experience, please drop a comment into the box below. The gap between good and bad is too wide, there needs to be a raising of the bar and this needs to happen without more ado.