Transfers slow , providers protest – consumers suffer.

Speed awareness – an issue in many walks of life


Two items of news over the past seven days have saddened me.

I cannot say I am surprised to hear that Government data shows 40% of pension transfer amber warnings are for unknown reasons, making it hard to understand whether the system is working.

I cannot say I am surprised to read this headline

I am sad, because after years of arguments , consumers are the losers in this debate . They are facing transfer times that have increased by a third in two years.

Problem 1; The problem for savers

The problem uncovered by Quilter’s John Greer and reported in Citywire is that the practice of throwing red or amber flags when there is a suspicion of fraud has escalated to a flag-fest where nearly half of the flags aren’t understood.

People looking to combine their small pots into a large pot are being sent to meetings with the Money and Pension Service to remind them of the dangers of doing so. These meetings are  a kind of speed awareness course that savers need to take.

They’re one on one (Braverman style) but while you know why you are on the speed awareness course, you and MaPS don’t know why your transfer has been deemed potentially dangerous. It makes for an awkward conversation for both sides and serves everyone badly.

Problem 2; the issues for Pension Companies

The problem “flagged” by Patrick Heath-Lay, the CEO of People’s Partnership (formerly “Pension”) is that his organization is being bullied into signing up to a 10 day transfer guarantee by Pension Bee.

He’s pushing back saying that his pension/partnership’s turnaround times are his and his trustee’s business and that he reserves the right to throw flags as required by the law.

The law says that when there is a suspicion that transfers are being incentivized by the “consolidator” or if there is evidence that the money is being invested overseas or if there is any other reason why the organization paying the transfer thinks something dodgy is afoot, a flag should be thrown and/or members should be acquainted with information that makes them think twice.

Pension Bee do incentivise transfers – partly  by making them easy – but notoriously by enhancing transfer values – a practice that has been practiced by occupational schemes as part of “de-risking exercises” for decades.

People’s Partnership want a system where money can only flow to pension pots which are demonstrably value for money – offering low cost, high performance investments with a decent quality of service.

Greater transparency and standardisation around key information such as charges and investment returns would improve the quality of saver decision making and lead them closer to a better outcome.  It should be the shared aim of the whole industry to arm savers with the good quality, clear, information so they can make an informed decision that’s right for them. If as an industry, we cannot manage that then consideration should be given to standardised pension vehicles to solve the problem for us.

So we don’t have this now?

Workplace pensions are governed by trustees , IGCs and GAAs.

Occupational schemes are regulated by the Pensions Regulator, GPPS by the FCA.

TPR operates various codes giving trustees guidance, the FCA is bringing in a Consumer Duty to supplement “Treating Customers Fairly”.

The DWP is looking to standardize all of this using the Value for Money framework which will initially cover People’s Partnership and eventually cover Pension Bee.

If things go wrong there is the Pension Ombudsman , the Financial Ombudsman and the Financial Services Compensation Scheme as well as compulsory insurance on all regulated stakeholders.

Taken together , the consumer is being supported and will be more so.

People’s Partnership’s position seems to have been created from a prejudice that institutional businesses with trustees and without shareholders will deliver better outcomes than retail businesses like Pension Bee.

I know this view is passionately held within the organization but ultimately it is the consumer’s money . People’s Partnership (Pension)  is not regulated by the FCA but it must find the right balance between the trustee’s fiduciary duty and its consumer duty. That is its problem.

Problem 3; What’s good for savers isn’t good for pension companies

Savers want to treat their pots like bank accounts and move them around as they see fit. Pension Companies say that pension (partnership) pots aren’t like bank accounts as the money in them is invested and needs more care to be taken.

But even when savers take care and take informed decisions, they find themselves in the equivalent of driver awareness courses , 40% of the time with no idea of what they’re doing wrong.

Meanwhile pension companies can throw flags which trigger visits to these courses, at their discretion.

Many of the pots in question are so small that the cost of getting the information (and an opinion) can be greater than the amount of money in the pot.

There is no incentive for Pension Companies to pay the money over , there is every incentive for organizations such as Pension Bee to make transfers easier and faster.

Pension Bee’s counter to People’s Pension is here

and more concisely by Ian McIntyre in a linked in comment

 Once a customer has made up their mind to move between pensions there is no excuse for delays. Its a poor administration service level pure and simple.

Quality of service

The battle to retain customers is not exclusive to UK DC pensions – it is of course a business problem for any consumer facing organization. In Australia it is seen as a key battleground between Supers and self-invested accounts and indeed between Supers (the Australian workplace pension).

The Government’s proposals for a Value for Money Framework  is currently designed to help employers and trustees but its methodology could easily be used by consumers.

It includes a “quality of service test”.

It will be interesting whether this test includes a metric for transfer times or sees quality of service in terms that People’s Partnership prefer (discretion to trustees to protect members).

My guess is that the pendulum is swinging towards the free flow of money where competition is based on service and performance rather than price.

If this applies to the way that employers and trustees take their decisions, why should it not apply to the decisions taken by consumers?

Aren’t they trying to combine pots to make their retirement finances a little easier? Shouldn’t they be able to make their own decisions about value for their money?

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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4 Responses to Transfers slow , providers protest – consumers suffer.

  1. The question you ask drives the answer you get. There are a few things afoot here and none to do with delays in order to “hold on to the money”.
    1. The regulations require a referral to MoneyHelper if an amber flag is found
    2. The regulations classify any incentive to transfer as a red flag
    3. DWP review of the regs will be out soon and likely to simplify the flags, so problem will go away
    4. The Incentive Exercises Code is clear about incentives – worth a read
    5. The PSIG Guide is also clear about handling flags and asks schemes to inform members of the reason for an amber flag and referral (as good communication) – worth a read.
    6. MoneyHelper is required to give the same interview to everyone no matter the reason for referral, so the lack of knowledge of the reason is a red herring
    7. The PSIG Guide is also clear about the use of clean lists and discretion to move along the transfers that are clearly not scams (ie c95% of all transfers requested)
    8. PASA DB Transfers Code is all about faster, safer transfers – worth a read.

    Rant over…..

  2. henry tapper says:

    Thanks Margaret, the DWP have been very lukewarm about these regulations but haven’t done anything to amend them. Do you think they work?

  3. Martin T says:

    The issues and frustrations of the current legislation must be sorted before the dashboard is launched, especially if we don’t have a default solution to the small pots problem. Alongside the issues Margaret notes is the fact that the flag system has no exemption for small pots, even those which are <£100. Can you imagine people logging on to a dashboard, seeing a load of micro pots, and trying to consolidate? The current system would simply be swamped.
    Scammers provide excellent customer service, so the delays and frustrations the current system creates may actually increase the risk of scams. Talk about unintended consequences…

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