FCA findings from multi-firm review of life insurers' pension transfer process

The FCA published its findings following a multi-firm review of life insurers' pension transfer processes.

The FCA requested data from 18 insurers, representing around 80 per cent of the individual personal pensions held by insurers. It reviewed the average time insurers took to complete a pension transfer, how they monitored and delivered their transfer process and the challenges they faced in achieving good customer outcomes.

The FCA found that insurers are well-intentioned and aim to ensure consumers receive good outcomes when transferring their pensions. Ceding schemes made most transfer payments within a suitable time of receiving the transfer request, with more than 75 per cent of the insurers surveyed completing transfer requests within an average of 20 days. However, many insurers face some challenges, particularly when deciding how to apply extra checks to protect customers and when responding to increased demand.

The FCA sets out its expectations, including under the consumer duty, including managing/avoiding:

• Unreasonable barriers to pension transfers, such as "sludge" practices that create barriers to changing products.
• Unnecessary delays in the transfer process, which can have financial consequences for customers and negatively impact their confidence in the industry and ability to manage their retirement planning.
• Necessary delays to transfers, for example when firms carry out additional steps and checks to protect consumers from scams, or flag valuable benefits that customers would give up if they transferred their pension. The FCA notes that customers are often directed to take guidance or advice before making a final decision in these cases.
• Pension fraud and scams. The FCA expects insurers to apply relevant regulations to support good outcomes and to be able to distinguish between reducing potential harm and delivering good consumer outcomes. They should also be alert to potential indicators of customer vulnerability.

The FCA notes that the launch of pensions dashboards will make it easier for consumers to track their pensions and insurers should be prepared for a potentially higher demand to consolidate pension pots.

The FCA will follow up with insurers that had slower transfer process times. In due course, it will publish its feedback and any consultation proposals following its December 2024 discussion paper (DP24/3), which considered how best to ensure consumers make informed choices about whether to transfer.