Clients often come to us wishing to transfer pension funds from previous employment into one consolidated pot so they can better manage their retirement fund – but the process can at times be a long one due to ‘red tape’.
Anti-scam regulations – quite rightly there to protect people – can slow the transfer down to the speed of frozen treacle.
Due diligence is of course absolutely vital and it is quite right that pension providers question why a transfer is being made and ensure the proposed new scheme is legitimate, because of course there are plenty of unscrupulous scammers out there seeking to take advantage. Transfer is certainly not always right for every client either.
For this reason, it is very important you seek professional advice from an Independent Financial Adviser (IFA) before considering the transfer of your pension funds.
But a recent article by Citywire has suggested many transfers are becoming bogged down in ‘sludge’ – that is to say, the ambiguity around the anti-scam rules mean providers have free rein to interpret them in different ways and so a perfectly modest transfer is held up or stopped altogether.
Several of our clients have experienced this for numerous months. They may admit they have not rushed to complete the process, however, after requesting details and then (after advice) the transfer from their pension provider from a former employment role or other personal pension, they can still be waiting on large and well known providers to complete the paperwork.
This is whether the plan is worth just a few pounds or six figures – there is no distinction.
Firstly of course, the clients will have sat down with us and considered their options, before a formal transfer request was made by us.
Some providers then eventually decide that a more detailed questionnaire needs completion by the client. Due diligence, fair enough.
We seem to find such things as ‘the necessary form then vanished in the post’ -on two recent occasions it never reached the client.
Eventually, for this one client, he was able to receive an emailed version and set about to complete it, only to discover that many of the questions had him completely baffled – ‘like an instruction manual for the Starship Enterprise’ was how it was described.
With calls and correspondence our staff could help him understand the questions and finally the revised version of ‘War and Peace’ (according to the client) was sent away.
We are still waiting to see if this has finally resolved things and the transfer can proceed.
In recent months, slow transfers are an industry-wide problem, according to Citywire. It says the DWP’s flag system, ‘introduced to combat a spike in scams, compounds the issue’.
Though as we have said, protection is vital, Citywire says some clients are finding their requests being held up and they give-up altogether on moving their pensions (though that can lead to compounded problems when it comes to taking benefits on retirement).
For our clients, often the transfer values are relatively modest but tidying old plans helps them connect meaningfully to their pension funds again (if transfers are right for them of course) and often after what they envisage has been years in limbo.
Our staff stay the course and are always on the case, nudging clients when needed but also chasing providers and helping clients navigate what for most people is a very confusing minefield. And to think we don’t charge a penny for doing all of that – maybe we are the ones being taken for a ride!
