Some pension savers are giving up on moving their pensions due to lengthy delays, according to Which?.
The consumer group said that while for some people there can be benefits to transferring or combining pension savings, such as lower fees or less admin, providers are permitted to take as long as six months to complete a transfer request.
It said some members of its Which? Connect online research panel it had spoken to said they had eventually given up on the process.
Some said the process took more than three months and up to six months to complete.
Which? said with pensions dashboards being developed, which will make it easier for people to see all their pensions in one place, more people are likely to be engaging with their retirement plans.
Which? said it is concerned the current system is “not fit for purpose”.
The consumer group said in one case, a 61-year-old man decided to consolidate three pension pots to make them easier to manage. While two of the transfers were completed within a few months, the third took 15 months to resolve.
During the wait, he started to question the safety of his savings, telling Which?: “You do hear about pension scams, so it crossed my mind as things started to drag on.”
When the transfer finally went through, he said it was a “huge relief”.
A financial adviser also told Which? about a nine-month wait faced by one of his clients.
Which? said that in general, bottlenecks can be caused due to antiquated processes, often requiring “wet” ink signatures. Sometimes, anti-fraud warning flag systems can also be applied by firms to legitimate requests, it added.
Get a free fractional share worth up to £100.
Capital at risk.
Terms and conditions apply.
Go to website
ADVERTISEMENT
Get a free fractional share worth up to £100.
Capital at risk.
Terms and conditions apply.
Go to website
ADVERTISEMENT
While flagging schemes serve an important function, flags can add friction for savers, the consumer group said.
The Financial Conduct Authority (FCA) is proposing new measures to better support non-advised consumers making transfer decisions, which Which? believes should allow for a faster overall timeframe while ensuring savers have the right information at their disposal at the start of the process.
The reforms will propose a 10-day data-sharing deadline, clear side-by-side comparisons for new and old schemes, and an industry-wide acceptance of digital signatures.
The FCA told Which? its review found more than 75% of sampled firms completed pension transfers within 10 days. It also stated the new proposals would provide consumers with “clearer, more timely and more meaningful information when considering a transfer”.
Jenny Ross, Which? Money editor, said: “It’s essential the industry urgently gets to grips with the issues facing pension savers and ensures a consistent service for those moving their retirement pots.”
A statement from the FCA said: “We know that more and more people are looking to transfer and this is why we’ve set out proposals to better support consumers making decisions.”
Sir Steve Webb, a former pensions minister who is now a partner at LCP (Lane Clark & Peacock) said: “It is understandable that people want to simplify their finances by combining pensions and there is no excuse for deliberate delays or old fashioned processes in a digital era.
“But combining pensions needs to be done careful and not in a rush.
“It is not easy to work out the best place to transfer pensions, and some old pensions may have valuable features such as early access or extra tax-free cash which it would be unwise to throw away lightly.
“In addition, the point of transferring pensions is the point of maximum vulnerability to pension scams and if things go wrong at this point it can be very hard to recover lost money.
“In short, we certainly need a more efficient transfer system, but not at the expense of making sure that there are proper checks and that people are able to make a considered decision.”
Henry Cainen, policy adviser, long-term savings policy at the Association of British Insurers (ABI), said: “We know how important it is for customers to be able to consolidate their pensions, and as an industry we are committed to making the process as smooth as possible.
“Our members have worked hard to improve the efficiency of pension transfers and have seen significant reductions in transfer times as a result. The Star initiative (which encourages smooth transfers) also demonstrates good practice and transparency in transfer times.
“We’ll continue to work closely with members and regulators to ensure that customers receive a straightforward and consistent service no matter which provider their pension is with, while maintaining robust protections to mitigate any risk of harm.”
Patrick Heath-Lay, chief executive of People’s Partnership, provider of the People’s Pension, said: “Transferring a pension is different to switching bank accounts as it can have long-lasting impacts on retirement outcomes.
“It is vitally important, however, that once savers have made their decision, the process should be simple and efficient.”
