- 21 firms, covering in excess of 35 million pensions, investments and policies, have already pledged to work within the STAR framework
- Growing community of firms signing up to industry framework
- Next stage of development will bring in technical working groups and a supplier forum – first Steering Group scheduled for May
- FCA is now firmly focussed on transfers and re-registration as an issue
A growing community of firms have signed up to the STAR initiative. STAR is tasked with delivering an industry standard for the transfer and reregistration of consumer’s money and investments from one financial company to another. This will significantly improve the transfer performance of the industry.
To date 21 companies, including some of the key industry players, have pledged to work within the STAR framework, covering the savings and investments of 35 million pensions.
With reports of transfers regularly taking several months to complete, yet banking being subject to a 7-day switching guarantee, it should be no surprise that the FCA has taken a keen interest in resolving the issue for consumers.
The STAR framework was highlighted in the FCA’s Investment Platforms Market Study final report published in March, where the FCA made it clear it expects the industry to resolve the transfers issue or it would face “further regulatory action”. The FCA said it was encouraging firms to consider participating in STAR “as a way of improving the switching process and achieving better outcomes for consumers.”
With the wide-ranging and extensive industry support, the next stage of STAR’s development will bring in technical working groups and a supplier forum, with the first Steering Group meeting scheduled for May.
Tom McPhail, Chair of the STAR Steering Committee said:
“This is about the industry doing things better for their customers but there is a commercial benefit too: In the transfer market we all have to deal with counterparties. It doesn’t matter how slick your own systems are, if the firm you’re dealing with isn’t willing to work quickly then you’ll still end up wasting time and money dealing with manual queries and you’ll have an unhappy customer.”
“Customers still sometimes have to wait for a pension schemes to write out a cheque and post it to complete a transfer. This one step in the process can add a week to a transfer. As a business, if you want to put a stop to this kind of arcane practice, you should sign up to STAR and encourage all other firms to do the same.”
“Hargreaves Lansdown’s own experience shows the benefit of firms collaborating: 75% of our SIPP transfers are completed in 11 days when executed electronically, but postal transfers take an average of 68 days to complete. There are even cases of transfers taking over 450 days.”
The STAR framework was developed in consultation with the DWP, TPR and FCA (through TRIG, the industry working group). As part of the ongoing operation of STAR, Management Information detailing which firms have joined and how they are performing will be regularly submitted to the regulators. This means firms which don’t join or persistently fail to improve will be identified.
STAR is establishing technical forums to agree the processes for the collection and reporting of MI and a forum also is being establishing for service providers such as transfer and re-registration businesses. This will facilitate consultation, process improvement and consistency of standards on an ongoing basis.
In addition, the first 30 firms that sign to STAR will be awarded a Founder Accreditation Mark, a highly visible endorsement of adoption of the STAR framework and its objectives to improve end-to-end transfers.
“There is now both a moral imperative from the consumer outcome perspective and a regulatory imperative for firms to willingly address the transfer issue and with the FCA pointing in this direction the best way for the industry to show its commitment to improving its game is to join STAR and benefit from becoming part of the solution.
Firms already signed up to STAR
- B&CE (The People's Pension)
- Barnett Waddingham
- DST Funds
- Fusion Wealth
- Hargreaves Lansdown
- Interactive Investor
- Janus Henderson
- Old Mutual Wealth
- Scottish Widows
- Standard Life Aberdeen
The main causes of delay (and costs to firms) cited by firms, include:
- Waiting to hear back from the ceding provider after transfer requested
- Waiting to hear back from the client when more/clarification of detail is requested
- Requesting transfer discharge forms from an existing provider by post
- Chasing those forms if not provided within expected timeframes
- Chasing the plan info required if not provided by ceding provider
- Sending discharge forms to the client to complete
- Sending discharge forms to the ceding scheme
- Process of setting up trade and settlement for stock transfer
- The re-registration process for funds, especially overseas based e.g. Dublin-based funds.
This level of hand-offs and additional processes are where potential for errors to be made exists for both the ceding and receiving parties. By providing the structured framework which every firm can follow, and reducing paper and manual processes, STAR is automatically simplifying the procedure and reducing the risk/delay areas.