Pension Transfer Delays Up to Six Months Deemed 'Not Fit for Purpose'
Lengthy delays in pension transfers are causing significant frustration for retirement savers, with some individuals ultimately abandoning the process altogether, according to a recent investigation by consumer group Which?. The organisation has labelled the current system as "not fit for purpose," highlighting that while transferring or consolidating pension pots can offer benefits like reduced fees and simplified administration, providers are legally permitted to take up to six months to complete a transfer request.
Case Studies Reveal Extreme Delays
Members of the Which? Connect online research panel reported giving up on transfers due to protracted waiting periods. In one particularly egregious example, a 61-year-old man attempted to consolidate three pension pots to streamline his retirement planning. While two transfers concluded within a few months, the third dragged on for an astonishing 15 months, causing him to worry about the security of his savings amid concerns over pension scams. He described the eventual completion as a "huge relief."
Similarly, a financial adviser shared an account of a client facing a nine-month wait for a pension transfer. These delays are not isolated incidents but rather symptomatic of broader systemic issues within the pension industry.
Root Causes of Bottlenecks
Which? identified several key factors contributing to these extensive delays. Antiquated processes that still require physical "wet" ink signatures are a major culprit, creating unnecessary friction in an increasingly digital world. Additionally, anti-fraud warning flag systems, while important for protecting savers from scams, are sometimes incorrectly applied to legitimate transfer requests, further stalling the process.
The consumer group emphasised that while these flagging schemes serve a vital protective function, they often add significant delays for savers, undermining confidence in the system.
Regulatory Reforms on the Horizon
In response to these challenges, the Financial Conduct Authority (FCA) is proposing new measures designed to better support non-advised consumers making pension transfer decisions. Which? believes these reforms could facilitate a faster overall timeframe while ensuring savers have access to the right information at the outset of the process.
The proposed changes include a 10-day deadline for data sharing between providers, clear side-by-side comparisons of old and new pension schemes, and industry-wide acceptance of digital signatures to modernise the process.
The FCA informed Which? that its review found more than 75% of sampled firms completed pension transfers within 10 days. The regulator stated that the new proposals aim to provide consumers with "clearer, more timely and more meaningful information when considering a transfer."
Industry Urged to Act
Jenny Ross, Which? Money editor, issued a stark warning: "It's essential the industry urgently gets to grips with the issues facing pension savers and ensures a consistent service for those moving their retirement pots." This call to action comes at a critical juncture, as the development of pensions dashboards—which will allow individuals to view all their pensions in one place—is expected to increase engagement with retirement planning, potentially leading to more transfer requests.
With the current system struggling under the weight of outdated practices and procedural inefficiencies, the need for swift and comprehensive reform has never been more apparent to protect the financial futures of millions of savers.
