This article was first published in PLSA: ViewPoint, Summer 2020.
Why do transfer processes need to improve?
Transfers can help customers simplify the way they manage their pensions; keep closer track of their retirement pots; help reduce charges and bring pension savings closer to other aspects of their financial lives. However, in the past executing a transfer process has been a slow, complex process, taking anything from 2 to 450 days to complete (TRIG 2016 research).
This variation in service clearly isn’t acceptable, particularly in a world where customers are becoming used to having access to their money when and where they want it, through initiatives such as Open Banking, and the overall evolution of digital finance.
Slow, inefficient transfer processes affect companies’ reputations, erode trust in pensions in general, and have direct cost implications for providers. This problem has been recognised both by regulators and government and the industry is trying to improve things voluntarily, not being forced to by regulatory intervention.
What is being done to address this?
This isn’t a simple fix. Transfers involve many different parties including platforms, insurers, fund managers, re-registration and transfer agents, custodians, third party administrators and trustees. And, to add further complexity it falls across multiple regulatory areas with the FCA, The Pensions Regulator and the DWP all overseeing different parts of the process.
To address this, ten trade bodies started working together in 2016 and formed the Transfers and Re-registration Industry Group (TRIG). This group included: The Association of British Insurers, The Association of Member Directed Pension Schemes, The Investment Association, The Pensions Administration Standards Association, The Pensions and Lifetime Savings Association, The Personal Investment Management & Financial Advice Association, The Society of Pension Professionals, TISA, UK Finance and The UK Platform Group.
In consultation with the regulators, TRIG drafted a framework for good practice transfers, based on service standards, performance monitoring and regular reporting. Working groups define processes and standards for specific aspects of transfers, and can also provide transparent measures of what good looks like. Its remit includes occupational pensions, but also covers ISAs, private pensions and others. The FCA has given a very clear message that if the industry cannot deliver on this, it will look to regulate the process. And the DWP and The Pensions Regulator are STAR Supporters too.
Governance and administration of the standards is now being managed under the brand name STAR. STAR was launched in 2019, with the remit of:
- defining the end-to-end process required to complete a transfer;
- specifying good practice standards and timings for each process component;
- measuring, recognising and accrediting performance excellence across the financial industry.
How does STAR work?
STAR recognises organisations for good performance through its accreditation scheme. Any organisation which is involved in any part of the transfer process chain can participate and become accredited. As a not-for-profit organisation, STAR is able to put all the money received from joining and annual fees back into the initiative.
This isn’t about a ‘pass or fail’ approach, but supporting participants in continuous improvement. This is reflected in the three levels of accreditation offered by STAR: bronze, silver and gold. As consumers, most pension scheme members will already be familiar with other similar rating systems, such as Defaqto, so this is a straightforward way of being able to demonstrate the quality of service on offer.
The need to improve transfer processes is not going away. It is one firmly within the immediate focus of government and the regulators. To address that, our biggest desire is to recognise as many organisations from across the industry as possible. Over 60 organisations have signed up with STAR so far, and the target, set by the Industry Associations, is for every Pension Provider, Platform and Fund Group to support this initiative. We’d therefore like to encourage all of these firms to get involved now, particularly now the initiative is in the implementation phase.