UK pension transfers are complex paper shuffling exercise at the best of times. They are also often constrained by the strict timeframes given for defined benefit pension transfers (three months from the date of producing the transfer value). Throw in any external shock to that system like COVID-19 and it simply gets more and more difficult to get pension transfers done within the allotted timeframe.
Three months may sound like a lot of time, but that’s from when a UK pension provider produces their valuation of your pension fund to when you must have your physically completed forms back to them. In the intervening period, you need to:
- have received the UK scheme forms, pension information and transfer value
- receive appropriate New Zealand based pension transfer advice
- receive appropriate New Zealand financial advice
- receive UK FCA registered advice on the proposed transfer
- establish your new NZ scheme,
- complete all the transfer forms
- have your new NZ scheme complete all their transfer and compliance related forms
- complete all the necessary HMRC documents and have all these documents back to the UK before the expiry date
Small delays to any part of the process can compound into missing crucial deadlines that can result in revaluations, higher tax liabilities on transfer and increased fees and unnecessary stress.
Pension transfers are time dependent and the post simply might not get through…
Wind, rain and snow may not halt the postal service but COVID-19 may well. A significant amount of international mail is sent on the very airlines that are significantly reducing their capacity. While this might seem trivial, many UK pension providers send out all information by post and their insistence on only receiving transfer forms back by post can significantly delay the transfer process transfer.
Already, it can be up to two weeks or more from when a UK provider produces a transfer value and when it’s received. Until you have the documents you can’t even start any of the steps listed above. UK providers usually cite that mail is more secure than email but we can’t count the times that pension forms have never turned up with clients and the UK providers cannot explain where they are.
With so many original documents needing to travel around the world and internally within New Zealand any delays in the postal or courier system leads to delays in transfers. Missing a transfer value cut-off can have serious consequences.
UK companies are not staffed to meet transfer demands…
Risk concentration is greatly increased with a smaller number of mega pension administrators
At present it appears that the UK is open for business. But there has been a structural shift in the industry over the last 20 years with far more companies outsourcing their pension administration to large companies like XPS and Willis Towers Watson. These companies are no longer small pension offices but global players with large centralised offices in the UK making them more susceptible to closure given the ease with which COVID-19 spreads. Given these admin behemoths run large household name schemes such as Barclays, Sainsbury, Mars, Sky, Lloyds and hundreds more, just one of these companies shutting it’s doors without adequate contingency planning could throw hundreds of UK pension schemes into complete disarray.
FCA advice market, going, going, gone…
Already there has been a massive contraction in the number of firms offering the FCA advice necessary to transfer a defined benefit pension (see our recent post https://qropsnz.com/defined-benefit-transfer-market-hits-the-skids-transfers-may-eventually-become-extinct/). COVID-19 could easily be the straw that breaks the camel’s back for these firms. They are already suffering under a weight of demand from their existing clients for sage financial advice in these turbulent times. Often most see the defined benefit transfer advice as an addendum service. With finite resources, writing reports for clients in New Zealand, Australia and elsewhere in the world is lowest on their list of priorities. Furthermore, they will need robust non-centralised infrastructure if their offices are closed down and staff forced to work from home. Standard turnaround times before COVID-19 for FCA advice were already between four and six weeks.
The delays in getting FCA advice are well documented, more often than not UK schemes don’t provide all the necessary information for the FCA adviser to complete their reports. By the time a UK scheme receives the request for a transfer value, processes it and then posts the information out, weeks can be wasted.
Proper planning can mitigate the delays and we guarantee to use ALL the tools at our disposal…
Proper planning means engaging with all the relevant parties early and not necessarily sequentially. It’s knowing what parties will require what documents and when, it’s pressuring UK schemes to provide the information in a timely manner and if possible electronically, it’s having a team on the ground in the UK working UK time, it’s a puzzle of a thousand pieces that needs to be pieced together with skill and speed. That’s where Charter Square comes in, as specialists at transferring pensions for over 20 years we’re here to help ensure you get your pension transferred on time and importantly backed with a decision to transfer that’s right for you.
