Safe harbor proposals for DC transfers to qualifying SIPPs

With over 70 people on the call, Pension Playpen’s coffee morning – featuring Pension Bee’s Romi Savova was a lively event.

Sadly, some of the more vociferous critics of Pension Bee’s complaint to the Minister couldn’t  attend but it was clear that there is a consensus not to let some ambiguous drafting of the DWP’s transfer regulations , get in the way of the free flow of transfers.

I hope that Cushon, People’s, Railpen and XPS will be able to see the video which I will post on this blog and more widely.

Pension Bee’s proposal is that a 10 day switch guarantee be introduced to which providers can sign up to, to give members the comfort of knowing they can combine funds without impediment.

I am reminded of a story told me by mark Scantlebury of Quietroom about a communications project he and Vincent Franklin took on for the Halifax. It was 2008 and Halifax was haemorrhaging funds as people withdrew their savings. Quietroom’s brief was to restore confidence and stop the outflows. Their answer was to announce to savers that they had made Halifax was making it easier to take money away.

Locking people away from their money can be counter-productive

This exercise in counter-intuitive behavioral economics resulted in the outflows being stemmed as people regained confidence in the Halifax and realised that they had no reason to panic.

Throwing  flags at the non-advised SIPPs (almost all of which offer refer a friend incentive schemes) is not the answer, the incentives we should worry about are more sinister than these marketing gimmicks.

One of the most forceful arguments of scammers during the BSPS Time to Choose fiasco, was that the Trustees were avoiding advertising that a third option (other than the PPF and BSPS2) was available. To disgruntled members of BSPS, this was a signal to head for the exit.

Arguments that throwing red flags protects members work when there is clearly something to protect people against (unauthorised overseas investments in offshore bonds for instance), but it can be counter-productive when there is a trusted vehicle such as a Hargreaves Lansdown, AJ Bell or Pension Bee Sipp.

So the discussion yesterday turned on Tom McPhail’s comments on the difficulty of establishing a list or designation of providers who might be considered to sit in a “safe harbor”.

My preferred solution is not to list the providers, as these lists need maintaining and usually get abused (look how MaPs list of transfer specialists was abused by rogue firms like Active Wealth). Instead, there should be designation by another means. For instance, any transfer to a multi-employer scheme (such as Nest, or People’s or Cushon or Railpen) should be deemed standard by the receiving scheme, provided a) there was no safeguarded benefit and b) the receiving scheme was accredited  under the Master Trust Assurance Framework.

For contract based schemes looking to receive transfers, entry to the safe-harbor would be granted provided a) there was no deemed safeguarded benefit and b) the receiving scheme could demonstrate value for money via the most recent IGC or GAA statement.

I think this would be a sensible use of VFM statements – which currently offer consumers little protection. IGCs who were later found not to have carried out due process in issuing a positive VFM statement, could be held to account for failings at the provider. This would bring some much needed teeth to the system of  assessment being carried out on IGCs and GAAs and would get the statements of IGCs and GAAs read and valued by the providers who are in danger of thinking these governance committees paper tigers.

It should be noted that all the non-workplace pensions such as Nutmeg, Interactive Investor, Wealthify , Penfold, Vanguard and AJ Bell, need now to have at least a GAA (to provide oversight of investment pathways).

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
This entry was posted in pensions and tagged , , , , , . Bookmark the permalink.

Leave a Reply