Duncan considers the peril of jumping!
Duncan Buchanan’s articles in Pension Expert are always worth reading, and his latest blog in Pensions Expert is no exception. He looks at small master trusts and asks just what would happen if one decided to pack it in.
He ponders and asks…
The size of pot and issues with data, coupled with the number and nature of the sponsoring employer base, may mean a bulk transfer is not possible. How then will the trustees complete their obligation to wind up?
The answer is that unless the DWP – and its Pensions Regulator set up a PPF for derelict DC schemes, these schemes will not pack up – but drift on – as Master Trust zombies.
What chance of getting out?
I put this to Romi Savova, who’s Pension Bee outfit run a data based Robin Hood Index that charts the times it takes to transfer out of workplace pensions.
Though the smaller master trusts don’t figure in her numbers, it’s not through want of people trying to get out of them! Romi reckons that if they ever do escape, it’s after 60- 90 days of trying.
Even NEST are taking the best part of 50 days. That’s because NEST don’t clear transfers through the Origo system, but like most occupational pension schemes, use a paper-based system that is anything but customer-centric.
It’s the classic financial services problem – easy in – hard out. It’s what those who sit in insurance company strategy group call “sticky business”.
In this, we’ve gone backwards
While stakeholder pensions weren’t a great success, they were at least designed with portability in mind. Insurance companies new that people could transfer from them and built processes that enabled to get out in real time. This led to the establishment of the Origo clearing system – to which only a handful of occupational schemes subscribe.
The arrival of master trusts has been greeted by those who run occupational schemes as a great step forward. But in some ways it is one step forward and two steps back.
Until Master Trusts offer an escape hatch, they remain dangerous craft to fly in.
If you are in a small master trust , I’d be asking your employer just why and asking for the trustee’s details. I’d be asking some serious questions about how to get out if I needed to.
If you are advising and have put your employers into a small master trust, I’d be worried and asking the same questions of your PI insurers.
Agreed. Nearl;y all the group pensions we established were group STAEKHOLDER and the ones we used offered pretty much the same fund chocies as the non stakeholder, just non of the esoteric and more expesnive funds that most who later fell in to the auto enrolment sector would not need or want for 20 or more years due to such small fund sizes.
While Stakeholder of itself was a bit of a damp squib, their introduction had a major impact on the Pensions Industry – the margins where squeezed, the price of pensions fell hugely and the bad old days of massive commissions went.
While Stakeholder of itself was a bit of a damp squib, their introduction had a major impact on the Pensions Industry – the margins where squeezed, the price of pensions fell hugely and the bad old days of massive commissions went.