DWP review a ‘missed opportunity’ to improve pension transfer quagmire

The review is a missed opportunity to help pension savers by streamlining the transfer process, says our head of pensions Alice Guy.

Alice Guy,Head of Pensions and Savings at interactive investor, says: “Financial rules, designed to catch scammers are miring thousands of transfers in the quagmire of delays and confusion.

“The unintended consequence of current regulation is that amber flags are often raised simply because pension savers wants to transfer their pension to a scheme where they can invest in overseas investments, causing unnecessary delays and frustration. The rules were designed to flag highly risky and potentially fraudulent overseas investments, but instead they are often catching mainstream investments in the net.

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“The fact that 57% of amber flags are being raised due to issues with overseas investments, highlights the scale of the problem and highlights the urgent need for the regulator to clarify the rules.

“Other transfers are being delayed because of delays getting an appointment with MoneyHelper.

“Other common problems are that some providers are misinterpreting the incentive rules and sending pension savers off for a MoneyHelper meeting simply because their new scheme has a cashback offer.

“Pension consolidation can be an important step in pension savers getting ready for retirement. Many pension savers are left with a myriad of small workplace pensions, and they often transfer them to one provider so they can have all their savings under one roof. When someone decides to make a pension transfer, it’s sometimes the first time they’ve sat down and carefully thought about their pension for a long time and we need to make sure it’s a positive experience rather than an off-putting nightmare of red tape.

“The review is a missed opportunity to help pension savers by streamlining the transfer process. The transfer rules are an important step to preventing pension scams as the consequences can be horrendous for those affected. But the current rules are causing delays and aren’t working well in many cases.

“There’s a danger that current rules, which are more onerous for some providers than others, discourage competition and fairness between providers, potentially undermining trust in the pension system.

“Making the pension transfer process as painless as possible should be a priority for the legislator. We need to make the process work smoothly to promote trust in our pension system and in our industry.”