Standard and Pru pilot pension transfer hub

This seems hugely risky to me. A retirement annuity pot of £3k with a guaranteed annuity rate that is roughly double current rates should not be transferred, and neither should an EPP pot of £3k which is all protected tax free cash. And 3 small pots of £3k each could be taken as trivial commutation.

Execution only in an area that could need advice does not seem to me to solve the problem.

And John, there is no such thing as a free service!

They aren't giving advice and if they are it is restricted or "simplified"

What concerns me is that this is one way the providers can bring in volume business without having to earn it through the advice process via an IFA and with no ongoing servicing fees etc, they get to keep all the profit.

But hey, if I was them I would be doing the same thing.

Why aren't we?

Simples! The advice process is still client focused, time consuming and only really applicable to those who after the 9/11 style (forgive the anology no offense intended) attack on our sector to diminish and close it down except for the very wealthy, which is really what RDR is about, will get rid of the major retail investment

distribution sector, put it into the hands of direct and banking providers with

no advice and you will see a reduction in consumer complaints as they would

have no merit (caveat emptor applies) and reduced costs for the lIfe and investment

firms currently struggling to bring in the crop.

I am 62, have loved my job of assisting clients in their financial planning requirements over 21 yrs as an IFA and often wonder why any young buck with

an ounce of common sense would even want to come into our industry post

2012 with the possibility of unlimited liabilty for any perceived mis selling.

Selling what you may ask? A reduced number of funds, products and providers

is inevitable in any event when RDR goes live.

It is my belief, that despite my being a glass half full individual and a blue sky thinker that my rose tinted glasses are going to go a dark shade of grey after 2012 as

it is also my firm belief that despite all the pundits thinking this is all going to work out find, we will see IFAs leave the industry in droves after 2012, when reality kicks in as to what the FSA has done to our sector and how difficult it will be to earn a

decent livelihood once the commission option for remuneration has been

denied to consumers.

Commission wasn't bad, it was just badly constructed and over the years providers were able to manipulate the system to bring in business which otherwise may not

have occured, but that is what growth is all about, show me a car salesperson

who does not work on an incentive to sell product basis and I will show you a firm in decline.

Sants and his crew will not back down, will not slow down the RDR cliff edge

lemming style parade and then will depart for ever more lucrative employment

elsewhere leaving us all to pick up the tab.

When I did a survey of my clients last year before this mess really hit the fan, most of whom are middle income bracket, the consensus was that a fair hourly rate for a financial adviser varied from £50 per hour to £75 per hour.

To be competitive and profitable most IFAs need to charge around £125 per hour.

The future is not orange, it is red and dead for the IFA sector as we have known and loved working in it.

Seems a good idea, apart from:

GARS

GIRS

Initial Units

MVAs

Old school transfer penalties

Members moving from lower charged to higher charged pensions

PTFC

Protected Retirement Ages

Money Purchase schemes with an underpin

etc etc

David, this was simply a sketch of what a transfer system to deal with small pots might look like in the future. There is no 'pilot'.

You are right that if we were going to allow existing pensions to transfer via such a system then safeguards would have to be built in to cover GARs, greater than 25% tax-free cash protection and trivial commutation.

Such a system is still a long way off and my hope is that it would also be used by advisers to move money more efficiently than at present.

Long overdue - the USS was doing this about fifty years ago.

It costs more than twice as much to administer two pension pots than one (thanks to HMRC) so the savings to providers will exceed the cost of running the service so it *can* be free to the saver.

Of course one should get advice before switching even a cash fund of £1k from Pru to Standard Life or vice versa but if the cost of advice is a multiple of the benefit who can justify that? So there needs to be large Health Warnings on the site "Have you got a Guaranteed Annuity Rate?" "Have you carried over your OMO and checked the different annuity rates offered?" "Have you looked at their long-term investment performance?" but the service should be welcomed.

John taking this a stage further how does the statement “for the service to be effective, all pension providers, including non-insurance companies like third party administrators, would need to sign up so automatic member consent could be achieved. ‘If we’re going to have a chance of having a system to amalgamate small pots then everyone needs to sign up” fit, are you expecting Standard Life to move Funds without IFA’s involvement ?

Mark, as noted above, this is simply a vision of how this might work. My expectation is that such a transfer portal would be used by IFAs to speed up pre-retirement transfers. As you probably know, Options is already widely in used by advisers in the 'at retirement' market, in order to move funds in an efficient and timely way. IFAs and annuity intermediaries are the exclusive users of that process.

Steve Webb, the Pensions Minister, has challenged the pensions industry to create a system which would allow small pots to be combined into larger pots. There are a number of ways that this could work, but what I was setting our above was a voluntary basis where members who leave group schemes would be encouraged to move their small pot to their new employer's scheme. If they were an IFA's customer then the IFA would be encouraged to help them combine pots. However, realistically we also need to look at how we deal with customers who advisers cannot economically serve.

Rather than Standard Life do this, I was suggesting that the customer do this themselves if they are unable to find an IFA to help them. In this situation, we would have to make it as simple as possible and, as noted in some of the comments above, build in lots of safeguards for legacy products in particular.

Options is only used to transfer money between insurers at present. But the group DC (for the avoidance of doubt, this system would not cover DB transfers) pension market is much wider than just insurers. There are some self administered DC schemes, some that use third-party administrators and some that use new non-insurer platforms to run their schemes. For a transfer system to be effective, all of these market participants, not just insurers, would have to join up.

Sounds to me like a way for providers to again go direct to market and lull planholders into believing they need to consolidate smaller pots to get a better income in their retirement.

I do think that simplifying the process of consolidating pensions is the right thing to do but these consumers will need guidance to avoid horrendous and ireeversible mistakes.

Whilst there needs to be debate about the triggers for consildation, and careful thought needs to go into the potential pitfalls as commentators above have highlighted, the mechanism to enable this is already in place. Options is currently joining together 28 providers, platforms and SIPP providers to speed up the transfer process. Significant in-roads have been made already with transfer times averaging just 9 calendar days, half of which is BACS transfer time. As John Lawson says above, everyone needs to be on board to ensure all transfers are speedy, but let's not invent a new thing when we are so close with Options. Whether OMO/IVPP, drawdown, pension to pension, occupational DC, open or closed book, or re-registration, Options covers it all right now. Those organisations who use Options are making a big difference for consumers and should be given great credit for leading the way.

Agree with Paul. The ludicrously slow and convoluted way many providers deal with pension transfers defies logical reason. It only adds to the expense for all involved.

Options has created a noticeable difference for transfers for the at-retirement point, and proves that life offices can act in a 21st century manner when they try.

If a similar system can be replicated for the pre-retirement market it would help all concerned. And don't forget, these legacy contracts with GARs, transfer penalties etc will eventually wither on the vine. People in their 20's now will only ever have "clean" contracts, and will want to move them on and consolidate them as they change jobs. What's not to like about an administration system that will assist that?

And of course, such a system will be a strong USP compared to NEST where transfers in and out will be disallowed for the foreseeable future (though I'm sure that's entirely co-incidental, and John Lawson and his colleagues hadn't even thought of that point!).

Christopher, the really good news is that Options does cover the pre-retirement market. A significant number of the 28 providers, Platforms and SIPP providers are joined via Options for this purpose, so the impact is building in pre-retirement as more companies come on stream.