While defined benefit pension transfers have always been a notoriously slow process, in recent years timescales have increased markedly.
In 2020, prior to the ban on contingent charging, the average DB transfer took approximately four months from an initial client approach to the completion of a transfer.
By 2022, this has almost doubled to seven and a half months, meaning you can now expect a DB transfer referral to take longer than purchasing a house.
Of course, this type of extreme timescale is entirely opposite to most clients' expectations in 2023: switching bank accounts takes around a week, a cash Isa a fortnight and a stocks & shares Isa around a month. Loans can be taken out at the touch of a button (or click of an app) and funds can be credited within hours.
The net result of this is that the vast majority of client frustration, and even complaints, is now timescale related.
This is not surprising when you consider the factors motivating those clients wishing to transfer to a flexible personal pension.
According to our analysis of around 1,700 of our clients, nearly half (48 per cent) are either already retired or considering retirement, while around one in 10 (11 per cent) are either seriously/terminally ill or in financial distress.
In the case of the latter, the average owed in unsecured debts is £15,350 with many incurring high interest charges during the long and frustrating wait.
Needless to say, this is also after you have managed to find a company willing and able to complete the transfer – an increasingly difficult thing to do.
Recent research carried out by Aegon has indicated only around a quarter of IFAs still provide DB transfer advice and this number is likely to reduce considerably over the coming years – primarily due to the risks involved for IFA’s in transacting this type of business and the increased professional indemnity costs incurred.
What does average mean?
Although the average transfer is around seven and a half months, in reality there is a large degree of variation. For example, around one in three transfers will complete in five months or less.
At the other end of the scale, about one in five transfers take 10 months or more. In fact, only around 10 per cent of transfers actually take the average of seven to eight months.
We will discuss later what factors impact these widely varying timescales, however the key point is that if you are in the initial stages of looking at a DB transfer with a client, whether you intend to provide advice yourself or refer to a third party transfer bureau, you will need to help them understand the reality of the process.
Why does it take so long?
Based on data gathered in 2022, it is possible to consider the three main parties involved in a transfer separately and an average for each.
