At PensionBee we believe that now is the time for the government to prepare transfer legislation for consumers to switch their pensions easily and safely. Outdated legislation from 1993 currently allows pension providers to take up to six months to transfer pensions, and doesn’t take into consideration any pension changes from the last 26 years, most notably the implications of Auto-Enrolment.
A few years ago we ran a campaign highlighting that it takes longer to transfer a pension than it does to fly to Mars! We believe the statutory transfer times need to be amended to establish a pension switch guarantee for ordinary defined contribution pensions. In Australia, switching takes three days.
Yesterday the Telegraph published our analysis of more than 50,000 defined contribution pension transfers processed since 2016. The data shows huge variations between firms, with some taking just 12 days while others can take two months or more.
The data we provided ranked 24 pension providers, from the slowest to the fastest, as shown below.
|Provider name||Average time (days)|
|Old Mutual Wealth||19|
|Sun Life Financial of Canada||19|
|Legal & General||18|
Note: the total sample size is 51,503 transfers conducted between 2016-2019. The sample size for each provider ranges from 141 observations to 7,914 observations. Notably the dataset includes transfers done on and off Origo Options for providers who use and don’t use electronic transfers.
Aviva was the best performing, with an average transfer time of 12 days, while Mercer was the worst with 62 days.
From a consumer perspective, pension switching is perceived as difficult. This is likely to put consumers off from starting and many give up along the way.
With continuous job switching and the dashboard looming, it is critical that consumers are able to combine their pensions, take advantage of better fee structures and generally have “ownership” over their money as the government constantly tells them to.
The transfer landscape
There is a simple, safe electronic system called Origo Options that most pension providers subscribe to. Transfers generally occur in 20 days or less. However, not all providers use the system and even among those who do, there are big differences in average transfer times.
Manual transfers require the posting around of highly sensitive information and documentation. Delays are often caused by obscure requests, including for original birth certificates (this was an issue in our case study). Understandably, many consumers give up because they are not willing to part with their original birth certificate.
Of course we don’t believe transfers should always be easy and where there are genuine scam concerns transfers should be done more slowly or not at all. The key is to transparently guide consumer expectations. The pending legislation to remove the statutory right to transfer to high risk scams will help close the gap.