Industry escapes FCA imposition of mandatory transfer times – for now
14 March 2019
The FCA has said it will not set enforceable switching and transfer times as yet, as a result of the industry undertaking self-improvement through launch of the STAR initiative.
In its Investment Platforms Market Study Final Report, the regulator set out its final position on improving switching and transfer times, as well as relevant consumer communications.
The FCA said, the work that had been achieved by STAR – a not-for- profit joint venture between Criterion and TeX – since the publication of the Interim Report in July 2018, had persuaded it that while there were still “concerns that consumers and advisers who want to switch platforms find it difficult to do because of the time, complexity and cost of switching”, it welcomed and supported “the progress industry is making to improve the switching process in the platforms, investments and pension sectors through STAR.”
STAR is in the process of implementing a framework established by the Transfers and Re-registration Industry Group (TRIG) which sets expectations for end-to-end standards, customer communications, and provides oversight and transparency. The FCA said this framework is “aligned with our desired outcomes to improve the customer experience, reduce how long it takes to complete transfers and ensure consumers can move to a better value platform that meets their needs more easily.”
It added that given progress and direction of travel to date, “this industry initiative may prove the most timely, proportionate and cost-effective remedy to improve outcomes for consumers.”
However, the regulator made it clear that it would review progress made by industry later this year and, if needed, again in 2020 “and take further regulatory action if necessary”.
Industry ‘must step up to the plate’
Caroline Mansley, managing director of Criterion, welcomed the regulator’s support for STAR but said there was “a lot of work ahead of the industry to meet the expectations of the FCA, which had“made it clear that it expects significant improvements”.
“The industry must now step up to the plate and commit to making improvements.The first step companies can take is to join STAR.
“We have already started making significant progress, with 17 companies having committed in principle to supporting STAR since it went live in November 2018.
“Once sufficient momentum has been gained, STAR intends publishing transfer performance data of member firms to highlight where the industry is in terms of transfer times, and to further drive improvements across the whole industry.”
Steven Cameron, Pensions director at Aegon welcomed the FCA “allowing the industry to lead on developing solutions to improving the efficiency and timeliness of transfers and re-registrations.
“The newly formed STAR initiative should deliver both short and longer term improvements in process efficiency and completion times.
However, he added: “While speedier processing is to be welcomed, this doesn’t remove the need for advisers to give careful consideration to any recommendation to switch platforms.”
As part of the steps companies could take to address the “underlying drivers of barriers to switching”, the FCA said its evidence showed use of electronic transfers could speed up the process.
Origo managing director Anthony Rafferty said the company’s Transfer Service, which it had been running for 10 years, had already reduced costs and inefficiencies in the industry. He said: “Our Transfer Service, in successful operation for over 10 years with over 100 companies on-board, facilitates cash and re-registration transfers, and has reduced transfer times to an average of 11 calendar days, removed £600m costs from the process for many businesses while processing c.50,000 transfers a month.
Rafferty likewise welcomed the FCA’s support for the industry’s STAR initiative to improve the efficiency of the transfer process, which he said was “very positive” and should “encourage other firms to join STAR so that even more consumers can switch platforms safely and easily with minimum cost and complexities to all parties involved.”
ATEB Consulting’s Steve Bailey examines why and how Paraplanners should consider a workplace pension in a pension transfer recommendation. Firms involved with...
Fund data and technology company FE fundinfo has acquired cashflow planning provider CashCalc, adding the cashflow planning capability to its suite...
The majority of paraplanners (58%) find suitability report writing software a useful tool but only if used in tandem...