A proposed overhaul of the pension transfer rules needs further work in order to make it fit for purpose, according to industry feedback.
The government has consulted on changes to the rules around pension transfers to reduce friction and delays in the system while also addressing concerns about small self-administered schemes (SSASs).
Respondents to the consultation praised the government’s intentions, but warned that some elements needed revision. In particular, several commentators flagged that ceding schemes were expected to assess the appropriateness of where an individual was transferring their pension.
This risked creating inconsistencies, according to Renny Biggins, head of policy products and long-term savings at The Investing and Saving Alliance (TISA).
Biggins said: “We welcome the intention behind these reforms to make legitimate pension transfers safer and more efficient. However, that objective will be undermined if the proposed ‘reputable’ threshold is left open to interpretation.
“Different ceding schemes could reach different conclusions about the same receiving scheme, recreating the inconsistency and delay the changes are intended to address. More robust guidance is required to help ensure consistent outcomes.
“Secondly, while ceding schemes have an important role in protecting members from scams, they should not be expected to assess the wider merits of other providers. That is the responsibility of the regulators. Once a scheme has been established as genuine, the transfer should proceed without further flags creating unnecessary friction.”
“Clear and practical guidance will be essential if schemes are to apply the new framework consistently and with confidence. Without that clarity, there is a risk that measures intended to speed up transfers could create new uncertainty and additional delays instead.”
Angela Staral, chief operating officer at People’s Pension, agreed that “further action is needed”.
“Without a common approach to assessing receiving schemes, there is a risk that today’s variation in process will persist, leading to continued uncertainty and delays for members,” Staral said.
“Schemes receiving transfer requests should be required to provide sufficient information to transferring schemes, creating a more balanced and efficient approach to decision-making.”
Zoe Alexander, executive director of policy and advocacy at Pensions UK, echoed the call for more input from regulators, saying: “Clear and practical guidance will be essential if schemes are to apply the new framework consistently and with confidence. Without that clarity, there is a risk that measures intended to speed up transfers could create new uncertainty and additional delays instead.”
Wider context of transfers important, says Cushon
Steve Watson, director of policy and research at Cushon, said the reforms needed to be set in the wider context of the pension system to ensure the sector becomes “simpler, more engaging and better designed around savers”.
“We look forward to the wider consultation later this year on modernising the transfer process and, in particular, how we help savers better understand their options and make informed decisions,” Watson said.
“A modern pensions system must make it easier for people to bring their savings together, see the bigger picture and achieve the best possible value from their pensions.”
Steve Watson, Cushon
“This matters because initiatives such as guided retirement will only deliver their full potential if savers are engaged with their whole pension position. Today, millions of people have multiple small pots spread across different schemes, making it harder for them to understand what they have and harder to make the right decisions for retirement.
“Pot proliferation is not just an administrative challenge; it is a barrier to engagement and ultimately better retirement outcomes. A modern pensions system must make it easier for people to bring their savings together, see the bigger picture and achieve the best possible value from their pensions.”
