Pension System Criticised as Savers Face Lengthy Transfer Delays
Consumer group Which? has issued a stark warning about the UK pension system, revealing that some savers are forced to wait up to six months to transfer their retirement pots. The lengthy delays are causing frustration and leading some individuals to abandon the process altogether, despite potential benefits such as lower fees and reduced administrative burden.
Frustration Mounts as Transfers Drag On
Which? conducted research through its Connect online panel, uncovering troubling cases where pension transfers took unreasonably long periods. In one particularly egregious example, a 61-year-old man attempted to consolidate three pension pots for easier management. While two transfers completed within a few months, the third dragged on for a staggering 15 months, causing significant anxiety about the safety of his savings.
"You do hear about pension scams, so it crossed my mind as things started to drag on," the saver told Which?. When the transfer finally completed, he described it as a "huge relief." Another case involved a financial adviser whose client faced a nine-month wait for a transfer to process.
Systemic Issues Behind the Delays
Which? identified several systemic problems contributing to these excessive delays. Antiquated processes that still require "wet" ink signatures create significant bottlenecks in an increasingly digital world. Additionally, anti-fraud warning flag systems, while important for protecting savers from scams, are sometimes applied to legitimate transfer requests, adding unnecessary friction and delays.
The consumer group expressed particular concern that with pensions dashboards being developed to help people view all their pensions in one place, more individuals will likely engage with their retirement planning. The current transfer system, Which? argues, is "not fit for purpose" for this expected increase in activity.
Regulatory Response and Proposed Reforms
The Financial Conduct Authority (FCA) has acknowledged these issues and is proposing new measures to better support consumers making transfer decisions without professional advice. Which? believes these reforms could lead to faster processing times while ensuring savers have adequate information from the outset.
The proposed changes include:
- A 10-day deadline for data sharing between providers
- Clear side-by-side comparisons of old and new pension schemes
- Industry-wide acceptance of digital signatures to replace paper-based processes
The FCA told Which? that its review found more than 75% of sampled firms completed pension transfers within 10 days. The regulator stated the new proposals would provide consumers with "clearer, more timely and more meaningful information when considering a transfer."
Industry Called to Action
Jenny Ross, Which? Money editor, emphasised the urgency of addressing these problems: "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."
The combination of outdated processes, cautious fraud prevention measures, and inconsistent service standards has created a system where pension savers face unnecessary delays and uncertainty when trying to manage their retirement savings effectively.
