I have recently been passed the slides of the PLSA?ABI+++ workshop on creating a common way for pension pots to follow members. You can find them here.
What a mess we are making of something so very simple!
Here is the landscape (actually a series of acronyms in little blue boxes)
What do all these boxes have in common? They all contain rights either to pensions or cash to buy a pension.
Rationalising things sounds like good news but it’s not a simple as all that; here are some more acronyms that are bulleted “wrappers”.
Some poor person has written out a list of the 549 different processes that need to be followed to consolidate one pot into another.
For the love of pensions- why does it have to be so hard?
Let’s cut to the quick.
The public want- wherever possible – to have a clear , simple view of their pension. That’s why we will have a pension dashboard showing the rights to a “wage in retirement – eg pension” and cash built up to buy a pension. As far as the public is concerned, that is all there is to it. All the blue boxes and wrappers are just hopeless complexity.
If you have a DB pension , whether it comes from the state or from an occupational scheme, you need not do anything but await the arrival of a string of payments into your bank account.
If you have money in pension pots, you are going to have to take decisions on how you get this money and for administrative purposes, you will probably want all your money in one great big pot.
Of course there are exceptions, some people will want to transfer their DB rights to increase their DC pot and some DC pots will be found to have some DB rights. But these are the exceptions. It does not have to be complicated to keep Joe Public informed.
Where it is simple
There are currently 92 DC providers signed up to the Origo hub. If you – the punter- are transferring money between these providers , you should be able to get the money flowing straight through. The established service standard for pots following members within this hub is 12 days.
Where it is not simple
But if you have DC pots administrated by organisations not in the Origo club of 92, you do not get the money flowing straight through. Infact you have to wait on average 43 days (source Pension Bee).
The providers in the simple world of Origo are typically operating contract based plans (SIPPs and GPPs) while those in the not so simple club are operating occupational pensions like master trusts and single employer occupational schemes.
Why is it so hard?
It would seem obvious for those outside of Origo to be inside Origo. Origo has no great cost of entry and the cost of using its system doesn’t seem prohibitive (£15 per transfer seems the small scheme rate with economies for those using it more often).
Origo do due diligence on you when you become part of its club which means you can receive transfers in as well as pay transfers out. (I will return to this in a moment)
Origo has a proven system that makes the quoted 549 processes a doddle. The cost of using the Origo system rather than self-administer a DC to DC transfer should be a “no-brainer”.
So why so hard?
I can only conclude, working as I do for an organisation that does not transfer through Origo, that Origo suffers an “occupational prejudice”. So far only one occupational master trust – People’s Pension is on the Origo list (note the strong links between People’s and insurer B&CE).
NEST, NOW, WTW, Capita, Mercer, Xafinity, Bluesky and all the single occupational schemes aren’t.
The PLSA/ABI Initiative
I am struggling to understand why those who are conspicuously failing to let pot follow member are demanding of those who are operating on a straight through process that they move back from 0 to 2 days as a service standard.
Addressing the final bullet point, we have a 0 hour standard – moving to a 48 hour standard may speed up the 40+ day laggards but it won’t help ordinary people much, in fact Origo transfers will become slower.
There really isn’t any reason why Origo should not be used by all occupational schemes but especially the larger ones. If I was a trustee of a large occupational DC scheme like Lloyds Bank or NEST – I would be demanding nothing less than the best.
Origo, as mentioned above, conducts due diligence on members entering the Club of 92. Clearly this is not enough for those outside the club who demand that due diligence is done again – usually at their client’s expense.
There is a very simple answer to the problem of due diligence. Origo should operate a definitive white-list which you are either on or not. If you are not on the white list you will find it hard to get money in and you’ll get stick from those taking money out. The only people who would not want due diligence done on them would be the scammers/
The cost of due diligence to this level would be the liability to Origo of a provider failure, this can be insured against or underwritten by Origo’s shareholders (the insurers). WE cannot have the scammers holding up the whole process as ponderous administrators apply layer after layer of due diligence on providers who self-evidently are suitable.
Moving swiftly forward
The ABI/PLSA group should be disbanded, the 48 hour standard should be abandoned. All DC providers should move to a 0 hours standard using Origo and there should be no more working groups to get there.
Pots should follow member unless it can be proved that their is DB in the pot, in which the pot needs to be advised upon. Due diligence should be conducted by Origo and relied upon. If necessary the cost of due diligence should be passed on in an increased Origo fee but this can be mitigated by the extra business Origo would generate.
The time and cost of transfers out (and in ) from (and to) occupational schemes should fall massively.
Pot should follow members, the system should be un-bunged and confidence in pensions will be improved as a result.