Revealed: The good and bad of pension transfers

XPS Pensions Group has the slowest pension transfer time on average, according to research by PensionBee. Hannah Godfrey reports...

XPS Pensions Group has the slowest pension transfer time on average, while Now: Pensions and Phoenix Life are two of the priciest providers, according to research by PensionBee.

PensionBee analysed a sample of 7,292 transfers to its platform and discovered the firms responsible for the slowest average transfer times and which providers have the biggest charges and exit fees.

PensionBee found XPS Pensions Group – formerly Xafinity – had the slowest average pension transfer time, with an average of 52 days.

Aon Hewitt and Towers Watson fared somewhat better, taking an average of 41 days per transfer, while Mercer took an average of 44 days, and Now: Pensions 45.

The frontrunners for speed included Aviva, Scottish Widows, B&CE, Canada Life and Pheonix Life, which all managed to transfer a pension in under two weeks on average.

XPS Pensions Group co-chief executive Paul Cuff said the PensionBee research relates to just six individual transfers from the group.

Around half of the time between initial contact and the transfer being paid the process was out of our hands – for example, members choosing what to do once in receipt of a quote,” he explained.

“We are dedicated to improving member outcomes and are supportive of what PensionsBee are trying to achieve in terms of raising standards, but care needs to be taken on research like this when the sample size for our firm is so small.”

Prices

The research also analysed a sample of 1,056 pensions for various charges. It found an annual charge of 62.1% was imposed by Now: Pensions – by far the biggest in the study.

PensionBee calculated the charges by adding up all fees, including fund fees, fixed sterling-based fees and any other policy fees that may apply.

In the case of Now: Pensions, according to PensionBee, a sterling-based fee of £18 is applied to fairly small pension values – approximately 40% of the pensions in the sample of 91 were below £100.

Zurich levied an average annual charge of 5.9%, Aegon 1.1% and Phoenix and NEST 1%.

PensionBee also found a number of providers operating at what it described as a “fairer fee structure”. Legal & General charged the lowest average annual fee at 0.3%, with Fidelity and B&CE following closely with fees of 0.4% and 0.5% respectively.

PensionBee examined the exit fees across 5,431 pensions and found 305 had charges.

The biggest came from Phoenix Life, who had charged someone an exit fee of £12,245 and were responsible for the top five exit fees in the study.

PensionBee chief executive Romi Savova said a lot of work remains to improve switching times and eliminate exit fees.

“We are determined to stay at the forefront of customers’ rights to have better pensions and ultimately a decent retirement,” she added.

Providers hit back

A Phoenix Group spokesperson said it was unable to confirm the accuracy of PensionBee’s findings as it had not seen the data. However, it said the pensions manager had wrongly listed exit charges as market value reductions (MVR).

“Phoenix has significantly improved the financial position of its many with-profits funds – to the extent that 75% of our with-profits policies are now paying an annual bonus again and very few policies have an MVR applied on early exit.

“However in some cases, the combination of generous guarantees and low investment returns over a significant portion of the policies’ lives means that MVR must be applied,” it explained.

Meanwhile Now: Pensions said the calculations were “inaccurate and misleading” as they were based on 92 people transferring out of small pots.

“As members continue to save with us and as auto-enrolment minimum contributions increase, the charges as a proportion of their pension pot will reduce. The dual charging structure is very cost effective over the longer term,” it said.