Pension Lab is urging the industry to use existing transfer technology to help tackle long-standing delays and inefficiencies in the Letters of Authority (LoA) process.
The fintech has completed a pilot demonstrating that open standards transfer technology, already used across pension, SIPP and ISA transfers, can also be used to validate LoAs and return selected information through structured digital responses.
The approach uses Discovery Messages, a feature of open standards transfers that can check information against provider records, validate or reject requests and, where systems are integrated, return information within seconds.
More than 150 financial institutions already use open standards transfer technology. Pension Lab said extending the capability to LoAs would allow providers to use existing infrastructure rather than build a new system or join another network.
Under current open standards transfer service levels, responses to Discovery Messages must be provided within two business days. Where systems are integrated, responses can be returned almost immediately.
The firm said LoA requests are currently submitted through multiple channels and in different formats. Providers must then identify and route requests, verify client authority and compile responses, creating additional administration and delays.
Pension Lab believes the use of existing transfer technology could support faster validation of requests and improve consistency in responses.
Scott Phillips, chief executive and founder of Pension Lab, said: “There is a real irony here. When using the right technology, transfers can be completed in 6 to 10 days using open standards. Yet the Letter of Authority – often the essential first step in that same journey – can be slower, more manual, and so frustrating for all parties involved.
“Our pilot has shown that the Discovery Messages used in open-standards transfers can help tackle the LoA challenge without providers needing to rebuild new or replace existing systems. Instead, they can rely on a proven infrastructure that supports interoperability and competition.
“For providers already using open-standards transfers, LoA validation and selected information responses can happen in seconds. That matters because providers spend valuable time sorting genuine LoA requests from speculative or incomplete ones. The Discovery Message can help check validity earlier, reduce avoidable manual work and make responses more consistent – one of the clearest examples of how open standards can make LoAs work better.”
Howard Finnegan, director of UK product sales at Equisoft, said: “Open standards already do the heavy lifting in transfers, and demand is growing as the industry looks for scalable answers to challenges such as small pots and master trust transfers.
“Equisoft’s transfer technology, underpinned by open standards, already encompasses the Discovery Message process. Extending that scope to help solve LoAs is a smart application of open standards. It means we take something already well-established in the market and apply it to a related process that has been crying out for a better way.”
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