The publication of DC to DC transfer time performance data sets a benchmark for trust-based schemes. Jonathan Stapleton reports.
The technology to transfer pensions electronically between one provider and another has been around for more than a decade but, despite this, there is still huge variation in the time taken to move member funds.
Yesterday (26 April), Origo, whose transfer service was launched in 2008, published the average transfer times of 27 of its member schemes and providers - representing around 80% of completed transfers by volume. It revealed that the average performance of a ceding scheme in the 12 months to 31 March was 9.3 calendar days.
The range between the best and worst providers, however, was significant with the best performance coming from Canada Life (5.0 days) and the worst coming from Hargreaves Lansdown (29.0 days).
- The customer asks their new provider to acquire their funds from the existing provider
- The acquiring provider asks the ceding provider to transfer the customer's money
- The ceding provider processes the transfer request, including any due diligence, divestment of funds etc, and sends the customer's money to the acquiring provider. This is the step for which performance is measured and published and the one that has been the focus of some concern.
But even if you focus on so-called simpler transfers - those that exclude more complex cases where approval or documentation is needed from third parties or where more illiquid assets need to be divested - the range is still wide, from Yorsipp (3.8 days) to Hargreaves Lansdown (29.9 days).
"It is possible in the right circumstances to reduce transfer times," Origo managing director Anthony Rafferty explains. "But it is important to remember that not all transfers are simple or the same and can be affected by numerous influencing factors, with an inevitable impact on the time taken to transfer. These include product and investment vehicle complexity, customer protection and risk management measures, illiquid asset divestment requirements and regulatory requirements, among others."
Rafferty says Origo will now publish this data on a quarterly basis going forward to showcase the industry's efforts to deliver improvements but also urges regulators to change the rules, which currently allow providers six months to effect a transfer. He notes: "This is far too long in this day and age."
Legal & General Investment Management head of customer service for defined contribution (DC) workplace pensions Colin Campbell, who also acts as chairman of Origo's transfer service steering group, agrees: "The steering group believes transfers is a key area where improvements can be achieved within the industry and by collectively publishing our data, we hope this transparency will help drive improvements in performance, which will ultimately benefit our customers."
Yet, so far, only 27 of the 100 names that make up Origo's transfer service have agreed to be listed, even if some others are expected to take part in future. And, among those that aren't currently taking part, there are far worse offenders in terms of transfer delays.
PensionsBee founder and chief executive Romina Savova, a member of Origo's transfer service and a long-time campaigner for speedier transfers, explains: "This group represents the good of the good and there are firms not represented here that can easily average over 50 days."
She says while such transfer times are legally acceptable, it contrasted to the experience in Australia where the mandated transfer time is just three days. She said long delays and manual processes also meant some people trying to conduct a transfer simply did not complete - with the give-up rate going as high as 60% for some providers.
Savova believes a number of providers are still relying on paper and post to transfer funds - noting that some trust-based schemes and their administrators are among the laggards in this respect.
Indeed, only a small number of master trust providers, including NEST and B&CE, have disclosed their transfer time data and many single-employer schemes and administrators are also absent from the list.
Pensions Administration Standards Association (PASA) chairwoman Kim Gubler says while the trustees of trust-based schemes have an onus to check a transfer isn't a scam, there is "no good reason" why a normal DC to DC transfer can't be done reasonably quickly.
She says: "The process has to be followed, the member has got to be protected, but there is no reason why it shouldn't take, once all the information is available, a matter of days to complete."
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