Pension Transfers Archives - People's Partnership

Leading workplace pension scheme People’s Pension¹ has launched a Pension Consolidation Calculator², a new tool designed to help pension savers understand the long-term impact of different charges when transferring pensions.

The tool allows savers to compare charges across different pensions, see long-term savings projections and understand how even slight percentage differences between charges affect retirement outcomes.

The launch coincides with a study People’s Pension has conducted³which highlights that many savers only understand the impact of different charges when transferring pensions if presented with tangible examples. However, the long-term impact of moving a pension to a higher charging scheme is significant. Analysis⁴ shows that a 30-year-old average earner moving a £10,000 pension pot from a provider charging 0.4% to one charging 0.75% would be left £32,834 worse off when they retired at 67.

The need for a simple comparison tool to compare charges is highlighted by the organisation’s previous research⁵, which revealed nearly three-quarters (72 per cent) of people who transferred a pension were unaware of the fees associated with their new or old pension, and 11 per cent were unaware that their new pension had any charges at all. The launch of the Pension Consolidation Calculator aims to address these knowledge gaps and help savers make better decisions for their retirement futures.

The Pension Consolidation Calculator follows from the scheme’s Pension Overview⁶ webpage, which provides key considerations, such as investment performance and service, for savers before transferring pensions, as well as a one-page document⁷ integrated into the online transfer process, highlighting the importance of charges, investment performance, and service.

The profit for people organisation is calling for greater collaboration from the pensions industry to allow people to compare their pensions based on the information that matters most. They are calling for:

A requirement for pensions providers to display simple, comparable and easy-to-find information on investment performance, charges and customer service.
Pension transfer incentives to be banned.
Pension providers and regulators to work together to create a consumer facing Value-for-Money framework to help savers make more informed decisions.
Commercial pension dashboards to be delayed until Value-for-Money metrics are displayed across all pensions.
An obligation on the receiving pension scheme to flag important differences between pension schemes, which may impact the final retirement pot, when processing a transfer.

Patrick Heath-Lay, CEO of People’s Pension, said:

“The pensions industry does nowhere near enough to help savers understand the impact of charges on their retirement pots when they are considering transferring. This lack of obligation on providers to be more transparent leads to a worrying number of uniformed transfer decisions, which are likely to be significantly detrimental to savers. This is exacerbated by incentives to transfer which often stops people reading the small print. It’s a critical problem because even small percentage differences in charges can have a significant effect on retirement outcomes. Urgent action is needed from the providers and regulators to help people make more informed decisions and to stop them from having to work for years longer before they can retire.

“The launch of our Pension Consolidation Calculator is a fundamental step in addressing this issue, helping savers make more informed decisions about their pensions to help them grow their savings. We believe all pension providers should offer clear, comparable, transparent information on charges so savers can better understand the potential impact of their decisions.”

ENDS

Notes to editors:

1. People’s Partnership provides The People’s Pension, the largest independent master trust in the UK, serving nearly 7 million pension savers across the UK and managing over £31bn in assets. As a business without shareholders, it reinvests its profits with the aim to help customers and achieve better financial outcomes for everyone.
2. https://thepeoplespension.co.uk/calculators/pension-consolidation-calculator/
3. The research was conducted by Ignition House, with 20 qualitative interviews with pension savers aged 22 to 65 who had consolidated their pensions in the past six months. Interviews were held in January and October 2024 to track shifts in member behaviour. Read the full report here.
4. The calculations are based on a 30-year-old who begins taking their pension in 2061. Total contributions are 8% and wage inflation is 3.5%. Investment returns are 5% (2.5% return and 2.5% inflation). The figures used for charges are reflective of current providers in the marketplace.
5. The research was conducted in November and December 2023 by People’s Partnership. They surveyed 1,000 people who had consolidated their defined contribution (DC) pensions, without the help of a financial adviser, in the last two years.
6. https://thepeoplespension.co.uk/pension/basics/our-charges-investment-and-service/
7. https://peoplespartnership.co.uk/media-centre/policy-research/transfer-outcomes-index/

For further details, please contact Sarah Puttock, the press officer at People’s Partnership on 01293 205336 or sarahputtock@peoplespartnership.co.uk

The introduction of Pensions Dashboards could see losses due to ‘poorly informed’ transfers into higher charging pensions soar beyond £2 billion before the end of the decade, leading workplace provider People’s Partnership¹ has warned today.

The provider of The People’s Pension, which serves more than 6.8 million members, has shared new data from its Pension Transfer Outcomes Index² showing losses from savers transferring into higher charging pensions will continue to rise. This trend is expected to increase once Pensions Dashboards, designed to give people an overview of all their pensions in one place, go live for the first time in two years’ time, on 31 October 2026.

New research³ commissioned by People’s Partnership has found that over 4 in 10 pension savers (42%) say they would be likely to use a pensions dashboard to move their pension from one company to another. An increase in transfers will lead to an increase in poorly informed pension transfer decisions, given the difficulties people face comparing their options, leaving many savers vulnerable to making choices that could negatively impact their financial future.

The profit for people organisation is calling for the incoming FCA Value for Money metrics to be clearly displayed on pensions dashboards. This will allow people to compare their pensions based on the information that matters most, such as the fees they are paying. This is supported by its research, which found that a simple way to compare the overall value for money provided by each of their pensions is one of the features over 4 in 10 (43%) pension savers most want to see on a dashboard, after a projection for their pension pot in retirement for over half of savers (53%).

The YouGov research also reveals that a fifth of pension savers (21%) have lost track of a pension. Half (50%) said they are likely to use a pensions dashboard to find any of their missing pensions, meaning millions could now take action on pensions previously lost to them, which could leave them thousands of pounds worse off in retirement.

Patrick Heath-Lay, CEO, People’s Partnership, said: “Pensions dashboards are a ticking timebomb for further detrimental pension transfers. Our research shows that many people find it difficult to navigate and compare their pension options due to overly complex or inconsistent information, leaving them extremely vulnerable in these types of transactions. With the arrival of dashboards, we anticipate this confusion will only intensify, making it even harder for savers to make informed decisions.

“We are very worried that dashboards will increase poorly informed decisions which lead to big losses over time. The risk is particularly severe if providers use dashboards as an opportunity to aggressively market the pensions they offer to consumers, without any way to easily compare options as we know that people don’t shop around for a pension transfer.

“It is vital that simple, easy-to-understand comparisons of value for money are on commercial pensions dashboards when they begin to go live in two years’ time, so people don’t fall victim to offers that seem better than they are and make decisions which they later regret. A simple consumer-facing value for money framework should apply to all pensions, not just relatively low-charging workplace options. Urgent action is needed to stop people from losing thousands of pounds and having to work for years longer before they can retire.”

People’s Partnership has previously revealed⁵ that nearly three quarters (72%) of people who had recently transferred a pension didn’t know exactly what the fees were for their new or old pension, and one in 10 (11%) didn’t think their new pension had any fees.

ENDS

Notes for editors:

1. People’s Partnership provides The People’s Pension, one of the largest independent master trusts in the UK, serving more than six million pension savers across the UK and manages £30bn in assets. As a business without shareholders, it reinvests its profits with the aim to help customers and achieve better financial outcomes for everyone.

2.Transfer Outcomes Index | People’s Partnership. The Index is based on movements where people switch from a lower charging workplace pension, which are subject to a charge cap, to higher charging, uncapped, retail schemes, for their lifetime pension saving journey. New analysis of People’s Partnership’s Pension Transfer Outcomes Index, which was launched in the summer, shows that pension transfer losses are projected to rise from £1.2bn in 2023 to £1.7bn by 2027, and by the end of the decade, they are expected to surpass £2bn2.

3. All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 2074 adults. Fieldwork was undertaken between 13th – 16th September 2024. The survey was carried out online. The figures have been weighted and are representative of all UK adults (aged 18+).The research was conducted in November and December 2023 by People’s Partnership. They surveyed 1,000 people who had consolidated their defined contribution (DC) pensions, without the help of a financial adviser, in the last two years.

Topic: Pension Transfers

People’s Pension launches new tool to help savers understand long-term impact of pension transfers

Notes to editors:

Pensions Dashboards could accelerate losses from pension transfers beyond £2 billion

Notes for editors: