FCA pension transfer review urges balance between speed & safety
The Financial Conduct Authority's (FCA) multi-firm review of life insurers' pension transfer processes has prompted significant commentary from key industry organisations, highlighting both progress and persistent obstacles in the journey toward safer and more efficient pension transfers for UK consumers.
Renny Biggins, Head of Retirement at The Investing and Saving Alliance (TISA), stated the findings underscored the delicate balance that firms must maintain between improving operational efficiency and safeguarding consumers from scams. "Today's report illustrates the tightrope firms are walking between improving the efficiency of pension transfers whilst also protecting consumers from scams," said Biggins. He acknowledged that the implementation of anti-scam regulations and the introduction of 'flags' had brought tangible benefits to consumer protection. However, he cautioned that these measures have also resulted in unintended consequences, leading to a disconnect between regulatory guidance, operational expectations and the underpinning legislation.
Biggins called for thoughtful amendments to the system, particularly the wording around certain amber flags. He said, "Amending the wording of some amber flags could address some of these consequences by reducing referrals whilst also continuing to protect consumers." Such changes, he argued, would ease the administrative burden on firms while maintaining robust consumer protections.
Looking forward, Biggins emphasised TISA's anticipation of the FCA's imminent consultation on changes to the pensions regulatory framework. He described this as a pivotal moment for the sector, with the potential to shape the future efficiency and security of pension transfers. "We eagerly anticipate the FCA's response to the consultation on changes to the pensions regulatory framework later this year, and look forward to working with them to create effective solutions that allow consumers to transfer their pensions safely and efficiently," he added. Biggins pointed out that the success of new initiatives such as Targeted Support and Pension Dashboards, both of which are designed to empower consumers and facilitate member-led consolidation, would depend heavily on streamlined transfer processes.
The industry's response was echoed by TISA Exchange (TeX), a not-for-profit body dedicated to enhancing the electronic transfer of wrappers and assets. Nigel Jacques-Pettinger, TeX's Executive Director, welcomed the FCA's findings, noting that significant gains had been made. "We welcome today's findings, which shine a light on the progress being made in the world of pension transfers, with many being processed promptly and efficiently, delivering positive outcomes for consumers," he remarked.
However, Jacques-Pettinger acknowledged that serious challenges remain. "It is clear that there are challenges which still need to be tackled by the industry. Many of us in the pensions administration world recognise the need to do more on high rejection levels, delays involving overseas assets, the use of manual processing and the efficiency of transfers out," he said. He stressed the need for continued modernisation, particularly through digital solutions and standardised processes.
TeX's commitment lies in fostering increased efficiency and improved outcomes across pension, ISA and General Investment Account (GIA) transfers. Jacques-Pettinger stated, "At TeX, we are committed to increasing the efficiency and improving outcomes for pension, ISA and GIA transfers through encouraging digital solutions, supporting a standardised approach and providing a 'legal contract' club for our members." He underlined the intent to work closely with the FCA and other sector stakeholders, ensuring that consumers benefit from expedient and accurate transfer processes.
The FCA's review, now under the scrutiny of industry leaders and stakeholders, is being seen as a milestone in the ongoing push for innovation and consumer protection within the pensions and life insurance sectors. Both TISA and TeX highlighted that closer collaboration between regulatory authorities, industry bodies and financial services firms will be essential as the sector adapts to new technologies and changing consumer needs. The commentary underscores the importance of striking the right balance between necessary legal safeguards and operational efficiency to foster trust and improve outcomes for pension savers across the country.
