The FCA has published the results from its multi-firm review of life insurers’ pension transfer process. The review followed concerns that consumers were complaining of slow transfer times. The FCA surveyed 18 firms whose policies represent around 80% of individual personal pensions held by life insurers.
Generally, the FCA found that most firms completed all transfer requests in an average of around 20 days, and that transfers happened more quickly when both ceding and receiving firms use digital platforms to process requests.
The study found that most firms try to ensure customers receive good outcomes from the transfer process, but the FCA notes that speed is not everything and that in some cases applying additional steps and checks can help to reduce the risk of harm – for instance, it can be helpful to introduce some friction to give customers time to understand and assess their options. So the FCA does not set a firm expectation on how long a pension transfer should take. The firms within the survey received around 1 million transfer requests in a 12 month period, mostly cash transfers. The vast majority of firms said they process all transfers within 15 days, often less, where a transfer required no additional checks. Where firms carried out additional checks and steps, though, the range was far greater – up to 160 days, with half the firms taking on average between 41-80 days.
The study notes the many reasons why consumers might consider transferring a pension, and what firms should be doing to support their customers in line with the Consumer Duty.
Key conclusions were:
- that firms must avoid causing foreseeable harm from poor or slow service: most firms did complete transfers within reasonable expectations but some took longer than expected. The FCA supports the use of digital platforms, when used securely;
- firms could articulate when they applied Amber flags to transfers, and the FCA stressed that firms must regularly review the reasons they use to ensure that their process is still driving the right outcome;
- fewer than 1% of requests are actually stopped by firms, and firms generally stopped them for one of 4 reasons, including that someone without proper authorisation was involved in the process: the FCA reminds firms of their duty to collect sufficient data and be able to justify the benefits of additional steps they decide to take;
- firms did not consistently capture information on where transfers were going to;
- firms are putting in good efforts to flag up to customers the benefits of their existing schemes when it appears that they may be looking to transfer based only on the prospect of immediate or near term reward; and
- firms are usually reviewing their processes with the Consumer Duty in mind and are looking to support good consumer outcomes. The FCA reminds firms that they should report to it concerns about particular transfers on which they have raised a Red or Amber flag or refused the transfer.
The FCA will be following up with firms who had noticeably slower service times.