Throwing out the pensions rule book and allowing people to invest their pensions using a “single pot” for cash, shares and other assets is a great idea. So great, in fact, that thousands of people are signing up for Sipps (self-invested personal pensions), the pension “wrappers” that make the most of these new freedoms from next April.
According to Killik & Co, 120,000 people now have Sipps. Its director of financial services, Malcolm Cuthbert, believes this figure could triple within the year. This could cause administrative gridlock.
Cuthbert warns that the life companies are working unacceptably slowly to effect pension transfers for Sipp holders. In June, before the Sipp bonanza took off, Killik found it took two to five weeks for the transfer cheque to come through – although this process is straightforward. Some companies are better than others at getting these things done: Cuthbert says Standard Life is the best at maintaining a speedy service.
However at other companies it has been taking up to six weeks for pension transfer cheques to arrive. Although there are 50-60 life companies in the UK, only five or six are giant players with thousands of requests for pension transfers to fulfil.
The backlog will get worse as April approaches, so the advice to anyone wanting to get out of an old pension and set up a new one is to get on to your adviser or Sipp provider and sort out the transfer as quickly as possible.