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Last Updated: Saturday, 19 November 2005, 14:41 GMT
Quicker pension transfer hopes
By Bob Howard
BBC Radio 4's Money Box

Alarm clock
Delays can leave vulnerable people with no money to live on

The Association of British Insurers (ABI) is to publish new guidelines on the transfer of mature pension funds by the end of the year, it has told BBC Radio 4's Money Box.

This comes after fears raised by independent financial advisers that many people are having to wait months to access their retirement money.

The people affected are those buying an annuity - an income for life - with their pension pot.

Often people will build up their retirement fund with one life company but when it comes to purchasing an annuity they move their money to another insurer to get a better rate.

And this is where problems are arising.

Adrian Reed, a 60-year-old Bristol dentist, had to wait almost two months to get his pension transferred by Scottish Life.

In his case he had other income to fall back on but he said others might not be so fortunate: "There are people who could be in a worse situation than me. They could have all their eggs in one basket."

Lost forever

Speed is all-important when it comes to buying an annuity as a quote only lasts for two weeks, so any delay can potentially mean losing thousands of pounds over the course of a person's retirement.

This is money lost forever, as IFA and annuity specialist Billy Burrows explained:

"Somebody who was held up with their pension transfer, for every 100,000, they could have ended up with 200 a year less.

Have you recently bought an annuity? Did you suffer any delays?
"Multiply that up by 18 years - which is their life expectancy - and we're talking several thousand pounds loss."

On occasion annuity rates may rise but the general trend is downwards.

That means if people do not get their money within this crucial window the next quote they get may well pay a lower annuity. And that is for life.

Besides losing out on rates, many people want their tax-free pension lump sum without delay.

If people's money comes late they also lose interest on it and may have no other money to live on.

New guidelines

Helen McCarthy, ABI
It should be possible to effect the transfer within 14 days
Helen McCarthy, ABI
One of the reasons for the delays is that hundreds of thousands of personal pensions taken out in the 1980s boom are now maturing.

At the same time, many life companies have cut back on staff.

Since the programme spoke to Mr Reed, Scottish Life has agreed to pay him interest because of his long wait.

The new guidelines will set out more clearly the information life companies must provide when transferring customers' money.

A standard transfer form to be used by all companies will also be introduced.

Helen McCarthy, ABI Head of Pensions and Savings Development, said that should help speed things up: "If all the information is provided, it should be possible to effect the transfer within 14 days."

The Financial Services Authority said it is examining the delays and working with the ABI on this matter.

BBC Radio 4's Money Box was broadcast on Saturday, 19 November, 2005, at 1204 GMT.

The programme was repeated on Sunday, 20 November, at 2102 GMT.


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