From LoA to infrastructure

Criterion's Nick Green provides his thoughts for FTAdviser on the FCA's latest consultation CP25/39: Adapting our requirements for a changing pensions market.

The FCA’s CP25/39 on non-advised transfers proposes a more formalised, time-bound approach to LoA-driven information exchange and, if implemented, could force providers to confront LoA performance, data quality and operational resilience head on.

Often portrayed as a frustration most keenly felt on the adviser side, the paper underscores that LoA pain extends to providers as well. LoAs are not limited to being an adviser-to-provider problem; there are significant inter- and intra-provider LoA volumes as data requests cut across internal business lines, legacy books, and administrators.

It is reassuring that the FCA recognises two major factors in the LoA process. First, just how critical it is. Secondly, how inconsistent both the sending and receiving parts of the process can be. LoAs are essential for collecting information on a customer’s behalf. Yet the process remains drenched in wet signatures and paper, multiple submission formats, unknown response times – and when the responses do arrive, they’re inconsistent, particularly on key data items like charges.

Research from Pension Lab estimates that around 3.9 million LoAs are submitted each year. I suspect this number is just the tip of the iceberg as internal and inter-provider LoA requests could be much higher. And when you consider the volumes, it’s no wonder the process is under scrutiny – with proposals for improvement and standardisation – and no longer a “nice-to-have” operational tidy-up.

Criterion, the integration standards body, chairs the Fix LoA Action Group (FLAG) - the industry’s voluntary forum established by Pension Lab to bring attention, investment and practical momentum to fixing the LoA process. With over 70 member organisations, FLAG demonstrates the breadth of the LoA pain - and, importantly, the shared commitment to solving it. A recurring agenda item is the FCA’s role and whether direct regulation is required, noting that Consumer Duty alone isn’t cutting it.

So CP25/39 could prove a regulatory-driven wake-up call. It would move LoA responses from “best efforts” into measurable service expectations with defined service timelines - such as ceding firms confirming receipt of the LoA within two business days, and providing a response within 10 business days. Advisers will recognise this part of the LoA process: you post, click submit, or email - and then wait, with little to no visibility of whether it has even reached the right place.

Alongside the timetable, the FCA is clear on two further points that could reshape the LoA process. First, LoAs do not require wet signatures: consent can be provided electronically, including via digital signatures, consistent with modern practice.

Secondly, the paper proposes a standardised information request to accompany the LoA. The aim is to ensure ceding firms return specific, comparable data - including safeguarded benefits, charges and death benefits - rather than a generic summary, or whatever is easiest for systems to produce. From a standards perspective, this is the right direction. Defined datasets reduce rekeying, cut ambiguity and make response times measurable.

With its scope limited to non-advised pension transfers, CP25/39 risks creating a two-tier experience with non-advised consumers getting clearer, faster information flows than those using regulated advice or transferring between TPR-regulated entities.

FCA expects to publish outcomes from this consultation later this year. But the direction of travel is clear and providers should act now. LoA handling must be treated as a core operational control, with clear ownership and performance management against the proposed timetable. Responses, at minimum, should align to the proposed minimum information set and be repeatable across products, administrators and legacy books. To do this cost-effectively at scale, investment in interoperable integration is needed so that LoA requests and responses move securely through systems without rekeying, manual triage or avoidable delay.

If the FCA is pushing the market towards structured, auditable and time-bound transfers, then the LoA is no longer “just admin”. It is infrastructure - and the firms that modernise it now will reduce operational risk, improve consumer outcomes and free up capacity for the innovation the market keeps asking for.