Pension transfers are a mess; what's the solution?

It's not just the time it takes to transfer funds that is the issue in my experience.

When you are first establishing whether it is even in the clients interest to look at transferring a pension, some providers are able to provide you sufficient data by email in the next day or two but worst case scenario I have had it take 10 weeks for information to be sent and even then half the information requested is missing as you tend to get a pretty much standard projection statement and little else.

If all providers had the same strict guidelines to turnaround times for information then surely it would make things smoother for everyone, including the client. If the providers exceed this deadline then they should be fined, even minimally, and at the end of the year they should be named and shamed.

Obviously, when it comes to completing an actual transfer, guidelines could again be applied but the deadlines would have to be broken down further as you couldn’t reasonably expect a commercial property to complete in the same timescale as an insured fund.

Part of the problem, I suspect, is insurers running multiple generations of old contracts with different charging structures, different access terms, different With Profits funds, historic and now irreplaceable features such as Contributions Insurance, GAR's, life cover and all the rest of it. Aviva, with its multitude of acquired policy books, is a classic case in point.

Plus, of course, so many life companies have pensioned off most of their mature and experienced employees and replaced them with young, inexperienced staff on half the money. Obviously a false economy.

And then, on top of that, we have successive governments making everything to do with private sector pensions more and more complicated and a current government that's so far reneged totally on the Conservatives' pre-election promise to put things right.

So is it any wonder that the pensions world is in a God-awful mess and that fewer and fewer people are inclined to make any sort of long term commitment to retirement saving?

Pensions are in desperate need of simplification, but nobody in a position to make it happen is taking a blind bit of notice of anything anyone's saying. And so we have NEST on the horizon, which nobody wants, which most employers and employees can't afford and which will be nothing more than a state designed quasi-compulsory scheme, with all the faults of the present system and maybe a few new ones beside. Madness.

From my experience it takes 6-10 weeks to transfer pension funds from life offices, if platforms in future can do this within a matter of days then that would help us and the clients no end. However, i sense this scenario is many years away yet!!

And thanks to the brilliant fund related projection rates comparing like with like becomes more difficult as company A uses rates of 3.25, 4.25 and 5.25 and can only use standard growth rates by manual intervention whereas company B does not cater for the rates used by company A except manually which adds further delays to the process.

And then there are all the problems you get when a client has two or three policies, all ostensibly with the same provider but, because each one has a different genesis, you find yourself more or less dealing with three different companies ~ again, Aviva is a case in point.

And no broker consultant (assuming you have one in your area who's even remotely interested in you) wants to dirty his fingers with anything as distasteful as admin problems ~ even though, if they do make the effort to initiate contact, they all tell you that they're "here to help, if need be". We had a bloke from Prudential who tried that one on us but, after three months of nothing but grief, he quietly disappeared, never again to be either seen or heard of, and there's been no replacement. Don't you just love the life companies?

Pension transfers, as well as ISA asset transfers, are already LIVE on Origo’s Options Transfers service, both in cash and in-specie via re-registration. There are 27 providers and platforms processing in excess of 25K transactions per month resulting in a significantly reduced average transfer time of 10 days.

Origo in collaboration with the industry and the ABI, is working hard to ensure customers are treated fairly through quick and efficient transfers of pensions and ISAs, and welcomes other organisations to join its successful service.

Actually transferring the policy value or units from one product wrapper to another is a relatively small and final part of the overall process, surely? You still have to screw out of the original provider chapter and verse on the terms, charges and possibly irreplaceable extras under the existing policy before making any recommendation to transfer ~ you can't just lift out the policy value and leave behind everything else simply because Provider A's funds and/or charges and/or admin are poor. This is what the FSA's pension fund switching review has been all about, isn't it? Or am I missing something?

Of course Julian, one of the problems is lazy IFA's who have no appetite to review the full disclosure and policy conditions previously sent to their customer and which already contain all of the information necessary and instead insist on sending some dodgy pension transfer questionnaire, where half the questions don't apply or options given don't contain the appropriate response. You must deal with some really bad companies to have the attitude you do towards providers - they really aren't all that bad.

Pension transfers actually started to log-jam the moment the courts decided that the receiving scheme has to pay for retrospective equalisation of benefits shoudl it be found subsequent to the transfer taking place that the ceding scheme had not equalised properly in accordance with European law. No scheme trustee in their right mind would accept an incomign transfer with such an open ended promise, hence the seizing up of the system.

Add to that the legal timelines for disclosure of details, some of which were stupidly long and there is your recipe for delay.

Since then the introduction of Origo Options, as mentioned by others and no doubt championed by some of the provider companies Julian has such a penchant for hating, has begun to restore the balance and get things moving quicker. Why invent something new - Origo Options is there and having a huge effect on reducing transfer times - use it.

The Origo Options initiative has made a difference to the speed at which money moves. However, none of the pension trustee/admin or any of the large pension schemes has signed up to it. The likes of Mercers make Prudential etc. look like saints when it comes to obtaining information and transferring money.

There is a problem of delays in obtaining information. There are several causes of this:

1. Insurance company staff dont receive adequate training on their own contracts, particularly legacy products.

2. Principles based regulation means that we have all interpreted the outcome of the FSAs pension switching review differently, so it's impossible for an insurance company to offer a standard set of forms. It also means that it is impossible to get the information you need about with profits funds, and very difficult to get useful information about funds available on existing contracts

3. There is no organisation to represent those involved in pension switching. So, even if we didnt have principles based regulation, there isnt anyone out there to come up with a standard questionnaire.

4. Pensions are ridiculously complex.

Completion of the pension switching questionnaire usually takes our report writers an hour or so for each pension. Then they and we have to make a choice about whether it is a good idea to switch or not; the suitability letter then requires half a day's work. That's before we actually do any transactions, and it ignores the time spent with the client.

A typical client has three or four pensions. So, a typical pension switching exercise takes us a day and a bit. Logically, people should be warned that, if they choose their pension badly, the future cost of switching will outweigh all the other charges!