DWP considers pension 'clearing house' in bid to ease transfers

There is a lot of rhetoric coming from Steve Webb, but it is a shame that this particular job in Government is seen as interim before something better comes along....

And you can point to this as a reason for jumbled policy and possible solutions, such as the clearing house, which are aired, then dropped as another new incumbent gets to grips with their own self-promotion. Nice idea but the obstacles of self-interest (inside and outside of Government) are too great to it ever becoming a reality. One final observation: this has the whiff of Big Government about it, even if the admin is outsourced (to Tata again!).

There already is a system for dealing with small pension pots - its called an IFA

See the previous article comments around their use of a consultant. All the comments still apply and there are already well used industry solutions that work very well from Origo. I don't believe there is an issue from most providers except from those not using the Origo service.

It's a complete waste of time from the Government.

@ Anon, 11:13.

Except that IFAs do not want to deal with small pension pots. We really do have to be clear - advice is needed at key points in life, such as forthcoming retirement and that's when IFAs can be very valuable, and the client can afford to pay (there are sufficient assets to charge a fee against).

But such stuff as moving a £3,000 pension pot when changing jobs really should be possible without expensive advice. If a system can be devised to allow simple and small financial things to be done without personal advice, then the system becomes properly oiled.

For bigger and more complex situations, advice is necessary, and an IFA is perfect for the job.

As 'can't put name' points out, this is what IFAs do. The problem, however, is that 'pension consolidation' isn't a valid reason for transfer in the FSA canon. An IFA has to research and give advice on each existing pension pot, however small, and whether it should be retained, transferred or even whether all the other pension pots might be transferred into it.

This is valid, to the extent that there may be guarantees to be lost or a preferable charging structure waiting to be used in there, somewhere. It does, however, have to be paid for, and this risks shrinking or negating any financial benefit for the client in the transfer.

Is Steve Webb about to suggest that writing 'Client wants Big Fat Pot' on the factfind, and repeating this in the Suitability Report, will be waived through by the FSA or its offspring? Maybe even a 'Big Fat Pot Exemption' or BFPE will find its way into COBS?

Many years ago, where someone had a very small 'pot' we used to be able to transfer it at minimum fuss and cost on the basis of consolidation.

Now the cost of analysis could be as much as the fund in extreme cases, but in any event will be disproportionate to the value obtained.

Why? Because the crazy amount of hoops that have to be jumped through created by a regulator with no common sense (yet they urge us to apply this) and a compensation culture that is probably the biggest growing industry in the UK have resulted in such transfers being priced out of the market.

I'm far from convinced that the idea proposed is the answer but surely some sort of 'super SIPP' holding company could be devised giving clients free and easy transfers and a complete choice of funds to invest in.

Mnn of Kent

I agree with you. How about Hoban going to the FSA and say any pension pot under £x can be transferred without advice?

I would set the level at the lifetime limit to keep it sensible?

That way we IFAs can transfer without the inordinate costs and research?

Also the simple report to the client could have the wording that satisfies the FSA like we have for Company lump sum contributions into a pension that satisfies HMRC?

Now Mr Hoban that is simplification.

This could work as long as

1. Old pensions werent included (too many guarantees and options)

2. Final salary schemes werent included

3. Employers were told that they couldnt pay the charges on group money purchase schemes (I doubt they'd need much encouragement) for staff who had left.

4. Self administered/invested schemes were excluded (I cant see a clearing house being happy to include property, loans etc)

5. Pension companies didnt mind becoming investment companies only

6. People trusted the clearing house

So it is possible for it to work for the majority of new pension pots. So, it wouldnt have much of an effect for a few years, but, over the next 20 years or so, it could make a big difference.

It would be nice if TISA or Helen Coulson thought to ask advisers - but then again, perhaps they havent because they recognise that we're a profession (and not part of their industry!)

Read an excellent comment over the weekend that this Government has now adopted the New Labour trick of announcing planned initiatives ad nauseam in the place of actually implementing anything that is remotely useful. This looks like another such pronouncement!