Petition Parliament for a 10 day pension transfer limit
When PensionBee asked me to support its campaign for a 10-day pension transfer limit, it struck a nerve.
I’ve switched banks, broadband, energy and insurance promptly and with minimum fuss. Why should pensions be such a pain?
Ages ago, I tried transferring a pension and braced myself for it to take forever. Some pension companies have a reputation for dragging their heels, so I didn’t bother following up for 10 weeks. I then discovered my application had got mislaid somewhere between the two companies and it ended up taking another 4 weeks before the pension money was finally transferred.
It doesn’t have to be this way.
Some of the biggest pension companies, including Aviva, Standard Life and Fidelity already use the ORIGO transfer service to complete pension transfers in well under 10 days.
Why it’s worth reviewing your pensions
My husband’s recent experience is a good example of why it’s well worth checking your pensions and considering switching.
My husband ended up with a couple of pension policies with ReAssure, after it bought out his old pension provider. One was from way back when people could opt out of part of the State Pension, and pay it into their own pension plan instead. The other contained contributions he made while at business school, when he didn’t have a work pension.
Neither had a huge balance – about £10,000 in one and £11,600 in the other. He got statements every so often and we just filed them away.
‘Review the ReAssure pensions’ never quite made it to the top of our to do list, but now I was keen to discover:
- Where is the money invested?
- What are the charges?
- What is the retirement date?
Where is the money invested?
When we finally got round to reading the statements, it turned out that ReAssure had already started ‘lifestyling’ one of the policies, where investments are automatically moved out of frisky shares and into more staid bonds as you get closer to retirement age.
I’ve blogged for PensionBee about why I’m not a big fan of lifestyling.
Mainly because, as the ReAssure statement explained, the lifestyling strategy is aimed at ‘using your pension pot to buy a guaranteed income for life’ aka an annuity.
Trouble is, just like many other people, my husband and I don’t want to by a guaranteed income for life. The ReAssure policies contain money that we’re intending to leave invested in drawdown during several decades of retirement. We therefore really want to stay predominantly in shares, with the chance of growth, rather than switching everything into cash and bonds that will be eaten away by inflation.
What are the charges?
I was also keen to check the charges, which proved surprisingly difficult.
I waded through the most recent 16-page statements for each policy, but could only find ‘charges paid to ReAssure’ listed in pounds for the year. That isn’t a great help with comparing elsewhere.
Instead, we had to use the policy numbers and specific fund names to track down the fund fees on the ReAssure website. The total expense ratio (TER) for most of the money wasn’t too bad, at 0.48% a year, with a 0.36% TER for the limited amount in cash and fixed interest.
However, the statement also mentioned policy fees for administration, and we struggled to find those. When my husband rang customer services, they couldn’t tell him over the phone either, but promised a letter ‘within 10 working days’. The 8-page letter, when it eventually arrived, referred us back to the website for fund charges but did also mention a £1 a month ‘administration fee’ per policy. On a £10,000 pension, that works out as 0.12% a year, taking the total including 0.48% fund fees to 0.6%.
What is the retirement date?
It turned out that only one policy had started lifestyling – because the two policies had two different retirement dates, five years apart.
I guess that’s the kind of thing that happens when you tick boxes when starting a pension, and don’t get round to reviewing it afterwards.
Transferring pensions for an easier life
In the end, we decided to move both pensions to PensionBee, helped by the easy to access app and clear simple fees.
We went for the Tracker plan, which is invested 80% in shares and 20% in bonds. The charges are a tad lower, at 0.5% a year, but as your balance grows PensionBee will halve the fees on any balance over £100,000.
My husband downloaded the app, provided relevant details like the policy numbers, and it was all wrapped up within 9 working days.
When pension transfers drag on
However, depending on your pension company, you may not be so lucky.
Some pension providers haven’t invested in the technology or use bespoke versions, and it all takes way longer. In the report by the Lang Cat commissioned by PensionBee, ‘A Switch In Time’, some financial advisers report pension transfers that have dragged on for more than a year. When I posted about the 10 Day Switch campaign on Linked In, one of my uni friends cited a pension transfer that dragged out for two years.
I fully appreciate the need to prevent pension scams, but I don’t believe that can be solved by posting paperwork back and forth.
Why pension transfer times matter
Fundamentally, lengthy transfer processes can put people off taking control of their pensions, and leave them trapped in poor value or unsuitable funds. Auto-enrolment and job switching have created a mountain of unclaimed pension pots – the value of lost pension pots in the UK has increased by 60%, or nearly £12 billion, since 2018, according to the Pensions Policy Institute.
I reckon the process of moving pension money needs to become easier and more efficient, not something to dread. I’m glad my husband’s pension transfer went so well. Let’s make sure more people have a positive outcome.
Do check out the campaign and please sign the petition calling for a 10 day pension transfer limit.
This post is a collaboration with PensionBee
Risk warning
As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.
