Need for Mandatory Maximum Time for Transfer of Funds When Buying an Annuity

Written by Karen Bryan

£10 and £20 notes 240After experiencing the disparity of the times taken for the transfer of personal pensions funds to an annuity provider, I think that there’s a case for the introduction of a mandatory maximum transfer time for open market options (when you don’t buy your annuity from the company with whom you hold your personal pension pot).

I had personal pension posts with two companies. My annuity broker, Annuity Line, sent out transfer request forms to Standard Life and Aviva, received by both firms on 29 April 2014. My annuity provider, Partnership Assurance, had received the funds from Standard Life on 2 May. However, it took until 13 May for the funds to arrive from Aviva.

The 13 May was the day before the rate guarantee from Partnership Assurance expired.

I was unhappy that Aviva transferred the money using the Banks Automated Clearing System (BACS) which, from some reason unclear to me, takes 3-5 working days. This seems crazy when I can carry out instant transfers in online banking.

I complained to Aviva about the length of time taken for the transfer of funds to Partnership Assurance.

In their response Aviva apologised that they had not carried out the transfer within the “agreed 12 day timescale”. I wasn’t sure if that was Aviva’s  own timescale or an industry-wide timescale.

I started off my phoning the Financial Ombudsman Service to ask if there were any industry-wide timescale agreements for the transfer of pension funds to an annuity provider. They were unable to assist, but put me through to the The Pensions Advisory Service (TAPS). No joy there either, but TAPS suggested I contact the Association of British Insurers (ABI). I was only able to leave a message, as the ABI was unable to answer my call. I didn’t get a response from them.

After a bit more research I came up with Origo, a third-party company who have carried out the bulk of pension industry transfers since 2009, through their ‘Options Transfers’ service. Both Standard Life and Aviva have signed up to Origo’s ‘Pension Transfers’ scheme with an agreed transfer timescale of 12 days. However, I couldn’t find any mention of sanctions if that deadline is missed.

The issue of personal pension pot transfer when buying an annuity is going to affect an increasing number of people with the introduction of the defined contribution National Employment Savings Trust (NEST) workplace pension scheme.

My Proposals for a Mandatory Maximum Time for Transfer of Funds to an Annuity Provider

  1. Transfers are made by an instant transfer, instead of the current BACS which takes 3-5 working days.
  2. There is a maximum of ten working days for the transfer to take place. If this is not achieved, there are financial penalties for offenders. These could include compensation for the delay in getting the first payment from an annuity and making up the difference if the annuity guarantee period is missed and annuity rates have dropped by the time the funds transfer is completed.