I saw the headline and – it being lunchtime – clicked the post. I thought that it was about time someone wrote an article on behalf of the people who want to transfer, rather than publishing the thoughts of  pension big-wigs moaning that people want to send their money to Pension Bee rather than keeping their money in a low-charging master trust.

It turned out that I was being quoted , which is nice – because I seem to one of the few “experts” who still think people have the right to have their pensions paid as they choose (and not solely on the basis of price).

Here’s the article – written by Victoria Bell – who I send virtual hugs to.

Matthew Walsh wanted to consolidate all his pensions into one place. At the age of 38, he had already worked in five jobs throughout his career and wanted to easily monitor how much he was saving.

The retail manager had successfully moved four of those pots into Penny Pensions, a pension consolidation app, within the space of a month.

But one of his pots, worth £396 and held with Scottish Widows has taken over a year to transfer.

The process consisted of time-consuming phone calls, emails back and forth, filling out various pieces of paperwork, sending it back, then it got ‘lost’. This dragged on for nearly a year, after which Walsh decided he ‘couldn’t be bothered’.

He has now cancelled his transfer. He’ll take another stab at it when he retires, he says, when he has more time on his hands.

Walsh’s case isn’t an isolated one. Thousands of people drop out of transferring their pensions because, simply put, it’s a pain.

How awful is this? What has this got to do with meeting the customer’s consumer duty. I bet that if Matthew values his time as low as  the Living Wage, he’s spent £396 of it already.

The delays have led to warnings that regulations designed to protect savers are increasingly putting them off engaging with their pension savings, potentially causing harm down the line.

Others are concerned that delays are driving mistrust in pension providers, putting people off saving anything at all for their retirement.

‘There are undoubtedly sleepers on the tracks, and certainly trains have been derailed,’ said Henry Tapper, chair of pension campaign group Age Wage.

Tapper said that at a point in time where people are being hammered with pension awareness drives, these delays will lead to people losing touch with pension pots.

‘It’s bringing pensions into disrepute,’ he said. ‘People are trying to do the right thing, trying to take control and they’re being knocked back.’

Couldn’t have put it better myself

Slow transfers are an industry-wide problem, as reported by Citywire in recent months. But the DWP’s flag system, introduced to combat a spike in scams, compounds the issue. Though well-intentioned, clients are finding their requests being held up and giving up on moving their pensions.

It looks like “consolidation” is a great idea so long as nobody actually tries it.

Broadly, providers now need to do their own due diligence to make sure the scheme it’s transferring to at a member’s request is legitimate. In certain circumstances an amber flag can be raised meaning a normal transfer can’t proceed.

One of the biggest reason for amber flags being raised is overseas investments, which are contained in most pension funds.

The Pension Regulator (TPR) is concerned that people are investing is in assets or funds where there is a lax, or non-existent, regulatory environment. You can think back on high-risk Cape Verde Hotel Property scheme, or unregulated investments in car parks.

But sources say that certain schemes are using the overseas investment as an automatic amber flag.

David Henderson, head of pensions at Penny Pensions, said that one provider had flagged the HSBC Global Strategy Balanced Portfolio for overseas exposure, despite it being what most would consider a fairly safe, if mundane, multi-asset fund. This shouldn’t be happening.

‘The regulator has been very clear in their guidance especially when it comes to overseas investments,’ said Jon Greer, head of retirement specialists at Quilter.  ‘They’re only looking to capture those that are unusual rather than the standard investments that most pension schemes hold.’

I am sure that the Pensions Regulator has the best of intentions but they and the DWP were warned by Margaret Snowdon and others when the 2021 regulations were published that it would come to this and it has.

Beyond due diligence

Platform sources have said that certain providers are using a ‘one size fits all’ approach. In a lot of cases the provider knows the destination scheme. Sometimes it’s well known, and yet lengthy questionnaires are still sent to customers.

Some have suggested that providers are going too far with due diligence.

‘What’s happened is the regulations gave a lot of firms the ability to batten down the flexibility,’ said one industry expert, who did not want to be named.

They are among many in the industry who take a cynical view that some bigger firms engage in ‘sludge’ tactics, friction that slows down processes, in this case, delaying transfers to deter people from moving their money away.

‘They go well above what’s normal due diligence,’ said Tony Webb from Quai Digital, a provider of tech and pension products. ‘It is not their job to ask whether Joe Bloggs has made the right decision, they aren’t giving advice, how can they determine whether they’ve made the right decision?’

Hold on… whatever happened to the portable personal pension. Back in 1986 when Mrs Thatcher introduced personal pensions, I was telling my clients that these things would be accepted by employers and could be taken from job to job to build up one great big pot to buy a pension. What stopped all that – the occupational pension scheme lobby! Here is an extract from Bristol University’s history of “Thatcher’s Pensions”

Inappropriate and immoral!

The reality is that people are no nearer getting a personal pension than they were in 1986. The condescending attitudes or Marshall Field and his like – persist to this day.

I do not include Oliver Morley of MaPS among the followers of Marshall Field and I hope he will be able to influence that organisation to reject their current role as flag-borers.

Money helper or hindrance?

And then there’s the government’s MoneyHelper scam sessions.

If an amber flag is raised, the client is referred by the provider to the sessions, run by the Money and Pension Service (Maps), for free scam guidance before completing the transfer. These can take a while to arrange

There were 16,000 referrals to Maps last year, and the biggest reason for people being referred is ‘unknown’, according to an analysis by AgeWage

(I have inserted the following graphic snipped from the Sun)

Not my research- Thanks Laura Purkess!

‘People don’t know why they’re being referred, Maps don’t know either. And the situation is getting worse the longer it goes on,’ Tapper said

One source who works for Maps admitted lots of customers don’t know the reason they were referred. The unnamed staff member said their understanding of the rules is that while guidance suggests it is ‘helpful’ for the provider to tell the member the reason for the flag, there is no legal obligation to do so.

The new Maps CEO Oliver Morley started in March but from early readings of the situation he suggested that providers need to be more transparent with clients.

‘I am conscious that it is quite difficult for someone who assumed they were making quite an easy pension transfer and they’re then having to go to Maps in that process for reasons they don’t understand,’ he told Citywire.

‘We would definitely like to see more transparency there like all our customers to be in a situation where they’re just thrown over to Maps without understanding why they’re there.’

Morely said he wanted providers to better prepare their clients for MoneyHelper sessions.

‘From our point of view, we try to be quick and the more transparent providers can be with their customers so they don’t come to us in a vacuum the better. Since the optionality lies with the providers it would be really helpful for us, but much more for the consumer to understand why they’re being referred.’

There are other issues here. MoneyHelper is a finite resource, and there is a sense that customers are being dumped there because of technicalities in the regulation. Because of this, people are waiting weeks for an appointment.

Adding to that, the calls are an hour long, take place during most people’s work day and customers are asked overly complicated questions about their finances, such as ‘how many overseas funds is your pension invested in?’

‘I do feel for people,’ said Morley, but he points out that the process is not designed for people who aren’t at risk.

‘If it’s a question of “everything is fine” it will feel like a waste of time but in some ways, that’s not the point, the point is it is serving to protect people from fraud.’

Come off it Oliver, the research from MaPS is clear, people haven’t got a clue why they’re being referred to MaPS and neither has MaPS! The situation isn’t tenable, the DWP said that we’d have changes to those reforms two years ago – why is this farce continuing?

Change afoot?

So what can be done? Morley argues that consumer duty can be a starting place for the FCA to demand better results.

‘Surely the regulator needs to step in. In light of the new consumer duty, I would expect it to take a dim view of delays,’ he said.

The DWP is also in the process of making the rules clearer so providers have less opportunity to read the rulebook as they want. A report in the Sun last month indicated the DWP is seeking parliamentary time to discuss the issue.

Another problem for providers is cost. The business of transferring pensions can be costly, and this has to be recouped elsewhere in the system somehow.

Last month, Rob Cochrane, workplace savings engagement and innovation specialist at Scottish Widows said in a pensions forum that the smallest pension they transferred was £5.62. The cost of completing the transfer, he said, was a lot more than £5.62.

Why is it costly? Time. The process is bogged down with huge amounts of wasted resources, email chasing, phone calls, time spent trying to get Maps appointments set up, and ultimately, it reduces the capacity to bring down charges.

It’s easy to see why providers might prefer to take a blanket approach in the circumstances, but ultimately providers they need to think about what benefits customers more.

‘In these organisations, they have large numbers of meetings, and in those meetings the person who shouts loudest is the person whose voice is heard saying “don’t take that risk”,’ Tapper said.

‘This culture is always assuming that the risk is someone will be scammed, there is no voice on the other side warning people will lose interest in their pensions. The counter risk is always promoted. What we end up with is sludge, where nothing moves.’

There is clearly a balance to be stuck between stopping risky transfers and delaying financial decisions. Providers need to do more to achieve it.

Like I said…