Why Pension Bee are right to push for a 10 day switch guarantee

It’s worth looking in more detail at Pension Bee’s work on DC transfer times. Paragraphs in italics are from yesterday’s much reported press release, my comments are not italicized

PensionBee analysis of Origo’s Pension Transfer Index has uncovered a 31% increase in transfer times, rising from an average of 10.7 days in 2020 to 14 days in 2022. In fact, the vast majority of pension providers included in Origo’s most recent index have increased the time it takes to process transfer requests over the last two years. 

Origo’s data is important. Origo process the majority of transfers and have, through their close links with the insurance world, become the dominant clearer of transfers for both workplace and non-workplace pensions. Its technical architecture is traditional and does not embrace more nimble clearing as being pioneered by ViaNova and others.

Despite slow transfer times being identified as a problem by the Financial Conduct Authority back in 2015, the issue remains prevalent amongst a number of key players.  This includes The People’s Pension, whose average transfer times doubled from 2020 to 2022, reaching 39.5 days; closely followed by LV= which recorded an average transfer time of 36 days and NEST at 21.8 days in 2022.

Peoples Pensions and Nest are large workplace pensions are members of the small pots working group and committed to improving the member experience. Although Nest is not directly impacted by the FCA’s Consumer Duty, it will be subject to the quality of service test of the DWP’s VFM framework which is aligned to both “treating customer’s fairly” and the “consumer duty”.  LV= is directly authorised by the FCA and therefore subject to the Consumer Duty, People’s Pension is owned by insurer B&CE which is regulated by the FCA and similarly subject to the FCA’s Consumer Duty.

Let’s hope that the DWP and the regulator’s are taking notice. As I have mentioned many times, it is not enough to be a workplace pension and consider yourself institutional, People’s and Nest should be striving to be best not worst in class – size should matter in a positive way.

However, by participating in the Origo Index, these providers do display a commitment to transparency and the eventual improvement of their transfer times. A large number of providers and third-party administrators continue to not participate in electronic pension transfers or publicly disclose their transfer times on Origo or elsewhere, showing limited engagement in the industry’s efforts to improve transfer efficiency for consumers.

This is an important point. The Pension Regulator has no powers over third party administrators. However, the quality of service they provide to DC pension schemes will increasingly come under scrutiny as occupational DC  schemes are required to submit themselves to a “quality of service” test.

PensionBee’s own pension transfer data reveals providers that have chosen not to join Origo and/or do not process transfers electronically, such as large pension administrators, operate with extremely lengthy transfer times. XPS Administration recorded an alarming average transfer time to PensionBee of 57 days in 2022. Meanwhile, Mercer took on average 33 days, Capita 32 days, Willis Towers Watson 26 days and Aon Hewitt 24 days in the same year. 

These services are an extension of consultancy services offered by XPS, Aon, Mercer and Willis Towers Watson. As well as being administrative guns for hire, these third party administrators are also embedded into their consultancies vertically integrated master trusts. There are particular reasons for XPS’ lengthy delays, it has taken an extreme position on the throwing of red flags , regarding investment into overseas assets – even when part of an FCA regulated fund, as a potential scam. This position brings anti-scamming into conflict with consumer duty and value for money. The DWP have pronounced against this practice but it persists.

In contrast, PensionBee has consistently taken an average of 10 days to complete a pension transfer request over the same period, as is in line with its proposed ‘Pension Switch Guarantee’ which would ensure switching providers is a quick, efficient and secure process which happens electronically within 10 days. 

I support a 10 day switch guarantee. It is perfectly feasible and deserves attention from the FCA and TPR. Compliance with it could become part of the VFM Framework’s quality of service test.

Becky O’Connor, Director of Public Affairs at PensionBee, commented: “It’s very concerning to see a sharp rise in pension transfer times. This latest data proves just how crucial it is to move away from self-regulation within the pensions industry and instead implement a ‘10-day Pension Switch Guarantee’, a time frame the Financial Ombudsman Service is already independently enforcing. This is essential to help restore confidence and trust in the pension system, allowing consumers to take control of their financial future and plan ahead for a happy retirement. 

Customers deserve to have an effective pension transfer process and the ability to voice complaints to the Ombudsman, giving them the same switching rights as is seen in other markets.”

I have written often about the need to improve standards in this area, it is not good enough for the occupational pension administrators and their trustees to chunter about retail pensions being bad value and potential scams. They perform an important function in helping ordinary people bring their pensions together and organise their retirement in a sensible way.

By contrast, the experience that many consumers get from their workplace pension providers falls short. I hope that Pension Bee continue to knock at the door of organizations such as the DWP , TPR and FCA and set standards these workplace pensions and their administrators should follow.

We should all have our plan for retirement, we should not let dog in the manger administrators frustrate it.

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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5 Responses to Why Pension Bee are right to push for a 10 day switch guarantee

  1. Martin T says:

    The increase in transfer time is no surprise given the current state of transfer due diligence regulation.

    I recall a lawyer speaking at a PPlaypen event strongly advocating all transfers were logged as an amber flag for overseas investments since “All will invest overseas and whether or not it is sensible to raise an amber flag that is what the law requires. It is not a discretionary decision, it is a legal direction.”.

  2. henry tapper says:

    The law’s an ass then – should we impose restrictions on overseas investments elsewhere in pensions? The selective application of red flags is bringing pensions into disrepute and (I am told) causing MaPS a lot of bother.

    • Martin T says:

      Agreed, and the lawyer who said this agreed too, but it is the law.

      In my view the law needs to change. My suggestion would be to have a “Green Flag” for schemes which are not Authorised Master Trusts but have gone through a review process to be accredited in some way. Transfers to a scheme with a Green Flag would not then trigger the Amber Flag for overseas investments, or trivial incentives (one of Pension Bees problems in the past).

  3. Martin T says:

    Unless something changes the system will collapse as soon as the dashboard alerts people to their scattered small pots. There is no exemption in law for the transfer of trivial sums and I have heard of transfers under £100 being given amber flags.

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