Ben Cocks, Products Director at Altus gives his views on pensions transfers in 2014.
The only thing you can be sure about in the pensions industry is that change will be hard, many people will say it can’t be done and progress will be glacially slow. But such is the demand for a solution to the pension transfer challenge that momentum is already beginning to build. Here are my predictions on how this will play out over the coming year.
Firstly, we will see the TISA led open standards pension transfer initiative begin to pay dividends. With the technical standards and the legal framework in place the first pension providers are already gearing up to use this in anger. The initial participants will be the large scale SIPP providers but trust based occupational providers and the life offices won’t be far behind. The competition between technology suppliers will result in the cost of pension transfers tumbling in the same way that we have already seen in the ISA world.
Secondly, we will see the first automatic ‘pot follows member’ transfer taking place. (Yes, ok, slightly more optimistic than my first prediction but bear with me.) By sticking initially to a simple ‘pension P45’ approach the DWP will successfully sidestep a big centralised IT disaster, the pensions bill will fly through parliament and the looming small pots tsunami will be successfully avoided.
Lastly, on this foundation of cheap and easy pension transfers, competition between pension providers will become much more effective, not just at the point an employer chooses a scheme but for each individual member choosing where to consolidate their growing pension pots. The fiercer competition will result in reduced fees making any further discussion of charge caps unnecessary.
All this success will undoubtedly increase support for Steve Webb’s idea of creating competition throughout the decumulation phase as well but we’ll have to wait until 2015 to see that happen. I think I’ve been quite optimistic enough for 2014 already.