Cash incentives make people switch pension without reading the small print – new research  shows

Offers of cash incentives make people ignore the fine print and switch their pension to a worse option, according to new research from leading workplace pension provider, People’s Partnership1 and the Behavioural Insights Team (BIT)2.

The provider of The People’s Pension commissioned BIT to conduct an online experiment3 with more than 5,500 people who hold a UK pension to test how they would respond to invitations to transfer their pension both with and without an incentive. They found that participants were 20% more likely to say that they would transfer their pension once seeing a cashback offer of just £100. That is despite the fact that higher fees charged by the new pension would have left them more than £1,000 worse off after just five years4.

The cash incentives were offered through adverts and personal referrals, and those who saw      them were 20% less likely to evaluate the offer by looking at the finer details of the terms in the offer, via the FAQs. This made them unable to judge what they were being offered.

This follows previous research which found that 72 per cent of people who had made a non-advised pension transfer didn’t know exactly what charges they were paying on their new pension or what they were charged for their old pension.

People’s Partnership believes the pensions industry needs to provide simple, easy to understand information for members when transferring, and is today calling for pension switching incentives to be banned, given the clear role they play in inhibiting people’s likelihood of reading the small print – critical details which make thousands of pounds of difference to a pension at retirement.

Patrick Heath-Lay, CEO, People’s Partnership, said:

“This research shows cash incentives bias the pension transfer process in ways that are often harmful as they act as a barrier against people considering what is on offer and whether it is value for money. They are also less likely to read and understand basic details about their new pension, even when these are prominent, and they stand to lose money.

“Healthy competition between pension providers should be based on the quality of pension products, not marketing tricks that exploit flaws in the way people think. We believe this research highlights practices that are contrary to the FCA’s Consumer Duty.

“This new research from BIT further underlines how vulnerable people are when transferring their pensions without advice. It is clear consumers don’t understand the key elements of value within a pension and the industry clearly isn’t doing enough to make the transfer process transparent and comparable.  

“We support moves by government and regulators to make value for money in pensions more transparent and comparable to the consumer. As it stands, the transfer market is too stacked in favour of pension providers, rather than in the interests of the consumer. This urgently needs to change.”

Ruth Persian, head of BIT UK’s Financial Behaviour Team, said:

“Pensions are complex and often confusing. Our experiment shows that ads promoting incentives, such as free cash offers, for transferring pensions can lead pension savers to ignore costs and other important information, and choose poor value products. As a result, pension savers could lose out on tens of thousands of pounds in retirement. This shows the importance of taking into account consumers’ behavioural biases in the sale of financial products and their marketing – something the FCA Consumer Duty now requires financial services to do.”


Pension transfers: understanding member behaviour

People’s Partnership wanted to learn more about how people arrived at the decision to transfer their pension.

People’s Partnership commissioned Ignition House to conduct a study into the behaviours of pension scheme members leading up to the decision to transfer their savings. Researchers surveyed 1,000 defined contribution savers aged between 18 and 65 who had transferred their pensions, without advice in the past two years.

Ten further interviews were conducted to further explore the rationale behind these pension transfers.

The primary motivation for pension consolidation lies in the desire for members to streamline their finances, with individuals seeking to consolidate their pensions to create a more cohesive and manageable situation. A third of our respondents gave financial simplification as their primary motive, and a further 25% said they were worried about losing track of their finances.

Download our Pension transfers: Understanding member behaviour report

Pension companies need more powers to help stop fraud

Greater powers are needed to halt ‘scam’ pension transfers – survey

Nearly eight out of ten (78 per cent) retirement savers agree that pension providers should be able to stop a pension transfer if fraud is suspected, a new survey has revealed.Nearly eight out of ten (78 per cent) retirement savers agree that pension providers should be able to stop a pension transfer if fraud is suspected, a new survey has revealed.

Research for The People’s Pension1, conducted by YouGov, found that more than three quarters of those questioned (78 per cent)2 agreed that pension companies should be able to step in to stop a pension transfer if they believe it’s a scam.

These findings come at the same time the government is being asked to consider including an amendment to the Pension Schemes Bill, which would enable pension companies and trustees to halt a transfer out of a scheme if it triggered any one of a number of ‘red flag’ warnings. Nearly half (49 per cent) of those surveyed strongly agreed that pension companies should be able to intervene in these cases.

Concerns have been raised that the coronavirus pandemic increases the risk that fraudsters will attempt to deprive savers of their retirement savings and the survey found that one in five (20 per cent) UK adults with a pension are now more worried about being a victim of a pension scam compared to a year ago. The same poll also showed that just over a third (34 per cent) of UK adults are more worried about being a victim of some sort of financial scam now compared to 12 months ago.

Phil Brown, director of policy at The People’s Pension, said: “The overwhelming consensus from the general public is that pension companies should be given the legal power to put the brakes on a transfer they think might by fraudulent. As it stands, providers and trustees can merely advise a customer when their suspicions are aroused and our research3 shows that £31 million of transfers went ahead last year even after the savers were made aware of the concerns. The industry needs the support of policy makers if it’s to win the war against merciless fraudsters.”

On Thursday, November 12th, former pensions minister Baroness Ros Altmann will chair a webinar – Who is protecting my pensions?3 – to discuss what can be done to stop fraudsters. She will be joined on the panel by Phil Brown, Margaret Snowdon, the chair of the Pensions Scams Industry Group (PSIG) and Stephen Timms MP, the chair of Parliament’s Work and Pensions Committee. Mr Timms proposed amendments to the Bill which would hand greater powers to trustees and although those were formally withdrawn at committee stage last week, the Government has committed to cross-party talks on the issue ahead of November 16, when the Bill reaches its final stages.

In September The People’s Pension and The Police Foundation published Protecting People’s Pensions: Understanding and Preventing Scams3, which called for urgent and decisive action to be taken by the authorities to stop criminals from the stealing the life savings of workers.


Patrick Heath-Lay

As Chief Executive Officer, Patrick is the driving force behind The People’s Pension and moving People’s Partnership from an organisation focused solely on the construction sector to a mainstream pension provider. Patrick is passionate about People’s Partnership and what the organisation is trying to achieve with The People’s Pension, and has been instrumental in shaping its ethos and beliefs.

Patrick is happy to talk about a range of issues covering pensions, including the development and success of The People’s Pension and the challenges and opportunities that leading a not-for-profit financial services company can bring.

Speaker enquiries: if you would like to book Patrick, please email

See Patrick’s LinkedIn profile

What to consider when transferring schemes

The UK occupational defined contribution (DC) market is one of the least consolidated in the developed world, but things are changing. Single-employer DC trusts are in the spotlight.

At the time of writing, there are 2,180 pension schemes in the UK. That’s considerably more than Australia, for example, with just 233, and Mexico, which has only 11 workplace pension schemes.

A growing trend for consolidation

The Pensions Regulator (TPR) and the Department for Work and Pensions (DWP) are encouraging consolidation in the UK DC landscape, promoting fewer, higher quality, better regulated schemes.

Single-employer DC trusts are being pushed along by a unique range of factors, including greater costs. Short service refunds were abolished just over 4 years ago. This prompted a rise in membership and a proliferation of small pots for many active DC pension schemes. However, for the larger number of smaller pensions schemes who offered this option, it can be costly and complicated to administer.

In the same year we saw the new 0.75% charge cap for default funds. Larger schemes, like The People’s Pension, have used their scale to make sure high-quality investment options remain available below this rate. Smaller schemes may have difficulty achieving this and, if they want active investment options, the charge cap poses significant challenges.

Regulators expect high standards of governance

Other pressures come from The Pensions Regulator. Its 2016 paper on 21st century trusteeship offered clarity on what they expected of pension scheme trustees. This includes:

  • their roles
  • board composition
  • risk management
  • and a host of other issues.

This renewed focus makes it abundantly clear that the expected standard of governance is high.

The regulator has also pointed out to trustees its high expectations of both transparency, not least in the chair’s annual statement, and good investment choices for members. DWP regulations also mean trustees must strengthen their approach to environmental, social and governance (ESG) issues in their investment options.

Trustee boards are now required to consider ESG. And this means time and money spent on adopting new policies and working with investment managers to offer new options. These are all material changes – requiring substantial amendments to working practices, policies, processes and the amount of time individual trustees spend on governing their schemes.

Trustees are feeling the pressure

Trustees that signed up to the role expecting a specific time commitment will be interested that the regulator is now asking whether quarterly meetings are enough – and whether the board should meet every month instead?

This increased burden on trustee boards is laid bare by data from the regulator. They have 5 key governance requirements – which range from independence to providing good value for members.

According to a May 2019 TPR report, just 23% of all pension schemes met 2 or more of these requirements. This is perhaps unsurprising, given that in the pensions market, the benefits of scale can be felt in governance, good value and the quality of investment options.

Master trusts: an option for consolidation

If the occupational DC pension market continues to consolidate it seems reasonable that trustee boards of single-employer DC schemes will look at master trusts as a possible consolidation option.

Master trusts operate under the same regulations and laws as single-employer DC trusts, unlike contract-based schemes, commonly referred to as group personal pensions. This means that the trustees have the same direct responsibility toward members’ best interests. Master trusts are just one of several available options, which is why we’ve created a ‘key considerations guide’, setting out what the journey could look like.

Read more

Find out more about what to consider on our webpage about consolidation of trust-based occupational pensions.


This article was written when we were B&CE, before we changed our name to People’s Partnership in November 2022.