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Industry disconnect seen as cause of DB pension transfer delays

10 August 2017

Standard data set and automated transfer solutions would formalise the information required and help speed up DB transfer process, says Origo.

New research from Origo has highlighted how the significant increase in demand for DB transfers has led to processing issues throughout the transfer process, creating delays for pension scheme members and frustrations for both pension administrators and financial adviser firms.

However, in its white paper published this week, the not-for-profit Fintech provider says it is a situation that could be addressed by use of standard documentation/data and existing automated transfer solutions that are successfully used for DC transfers.

The research was undertaken among 16 third-party administrators (TPAs) and employee benefit consultants (EBCs), and identified that the companies had seen significant increases in requests for cash equivalent transfer values (CETVs), of up to 135%, and increases in pension transfer volumes of up to 100% – setting historical highs for those companies. The trend to transfer is expected to continue once pensions dashboards are introduced in 2019, which will make people more aware of their pensions values and their options.

Paul Pettitt, managing director of Origo, says one of the key issues flagged by the research is the silo-like nature of the transfer process, which made it difficult for administrators to accurately provide end-to-end transfer times. But, he pointed out, the regulatory timeframe, as mapped by The Pensions Regulator (tPR), for a DB transfer is 9 months (1).

Included in that time frame is the need for ceding schemes to carry out a number of mandatory checks, including member ID, due diligence on the receiving scheme and advice checks. These checks are also essential to counter scammers, Pettitt says, but inevitably further slow down a process which members often expect to be as simple as transferring money between bank accounts.

One of the most commonly reported “frustrations” and barriers to smoother, faster transfers, cited by TPAs and EBCs in the white paper, was a “bottleneck” caused by what they describe as inconsistent and constant data requests from IFAs. This was attributed by respondents to IFAs being used to DC transfer requests but having less experience of the DB transfer process, resulting in requests for data deemed “irrelevant” to obtaining a transfer value analysis (TVA) report.

This has resulted in some administrators providing the absolute minimum data they believe is required for TVAS, in order to deal with the volumes of requests.

On the other side of the coin, it was recognised that IFAs consider the information supplied by pension scheme administrators as not fully encompassing their needs in order to provide full advice to the client.

In addition, DC transfers are largely automated, such as via the Options Transfers process, whereas DB transfers as well as being more complicated, particularly where guarantees are involved, are often manually processed.

The white paper reports that in order to deal with the unprecedented volumes of request for transfer data that they are experiencing, TPAs and EBCs have been adopting coping mechanisms as short-term solutions. These include:

• throwing additional staff at the problem and temporary team restructures;

• inclusion of CETVs in annual statements;

• over-reliance on spreadsheets to speed up calculations;

• compiling lists of schemes agreed as being safe for transfer.

But, Pettitt says, “shortcuts come with inherent risks, particularly in manual systems which are already creaking under the strain of the volume of requests”.

A better transfer experience could be achieved for all parties, Pettitt suggests, by the adoption of industry agreed standards and technology.

This would require the creation, agreement and maintenance of a standard data set or message/electronic form, for example, which could remove the constant toing and froing between parties and speed up the early transfer stages.

Some industry initiatives exist, looking at best practice and protection of members. The Transfers and Re-registration Industry Group (TRIG) was set up last year, and its chair, Hargreaves Lansdown’s Tom McPhail recently called upon the occupational pension side of the industry to be better represented in the Group. Also, in its Advising on Pension Transfers paper (CP17/16) published in June, the Financial Conduct Authority opened a consultation on new rules that will better identify consumers’ transfer objectives and ways to replace the current transfer value analysis requirement.

From a practical perspective, Pettitt says creation of a standard at the right stage of the transfer process could “help cut costs, reduce errors and help ensure timely transfer requests. Reducing paperwork from the transfer process would also help to improve transfer times.

“Origo, is urging the industry to recognise the burdens and issues within the DB pension transfer process and the impact it is having on administration costs and poor member experience and for there to be a collaborative industry approach to solve these issues.”

1 Regulatory guidance for timescales, as set out by The Pensions Regulator for statutory transfers over £30,000, maps out a 9 month end-to-end process.


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