Pension transfers: A year of lessons and the road ahead

It’s been a year since we launched our campaign to address the overlooked, yet critically important, issue of pension transfers.

In this time, we’ve seen firsthand how many savers make pension transfer decisions without fully understanding the long-term impact. Our ongoing research has shown that far too many individuals are not equipped with the necessary tools and information to make informed choices.

It’s an enormous problem that the pensions industry has failed to adequately address – last year there were over a million transfers – and it’s something we should all be extremely concerned about as this is projected to grow exponentially with the introduction of dashboards.

The great knowledge gap

Through our ongoing work at The People’s Pension, we’ve dug deep into understanding what drives savers to transfer their pensions.

One thing is clear: far too many people make decisions based on incomplete or inaccurate information. In fact, our initial research last year shows that nearly three-quarters of individuals (72%) who recently transferred their pension didn’t know what the fees were on their old pension or what they were being charged on their new one.

We also found that around 11% of those who transferred didn’t think their new pension would have any fees at all.

And it doesn’t stop there. Our research has also found that many savers assume that consolidating into a single scheme would reduce charges, and that they do not understand the difference between flat-rate and percentage-based fees.

Another commonly held view is that any charge under 1% is essentially the same, when in fact a 0.9% fee could leave someone with thousands of pounds less in their pension at retirement than a 0.5% fee.

Analysis shows that for a 30-year-old average earner moving a £10,000 pension pot from a provider charging 0.4% to one charging 0.75%, would leave them £32,834 worse off when they retired at 67.

Think about that for a moment: how many of us would make a major financial decision, like buying a home, without knowing exactly what we were being charged? Yet, when it comes to pensions, that’s precisely what’s happening.

Empowering better choices

As an industry we fail to offer clear, comparable information that could empower savers to make better financial choices.

Each month, tens of thousands of people are being encouraged to transfer their defined contribution pensions but, as it stands, it’s incredibly difficult, if not impossible, for the average saver to compare what’s on offer.

We’ve heard the industry talk about protecting savers numerous times, but in practice, too much of the internal workings of the pensions system favour the providers rather than the savers. There’s a glaring disconnect between what providers consider is important and what savers need.

Defined contribution (DC) transfers are big business, with over a million transfers occurring annually, and we must remember that in October 2026, pensions dashboards are due to go live, making transferring and consolidating pensions even easier than it is now.

Choice for consumers is very important. However, when people are deciding to transfer, it must be an informed decision, not one which unknowingly has the potential to cost them thousands of pounds.

While some steps are being made to protect savers – late last year the Financial Conduct Authority launched a review of DC pension rules to establish regulations aimed at protecting consumers when commercial dashboards are licensed – my 40 years’ experience in the industry tells me that the industry will be working hard to ensure their commercial dashboards attract new customers. After all, they are called ‘commercial’ dashboards for a reason.

Next steps for the industry

So, what needs to happen next? We are calling for greater collaboration from the pensions industry to drive transparency and comparability, so that savers can compare their pensions based on the information that matters most.

We believe there are five key actions that would drastically improve the pension transfer process and ensure savers can make better, more informed decisions.

We 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.

It’s clear that there’s still a lot of work to be done before we can confidently say that pensions are functioning as effectively as possible for savers.

Poorly informed pension transfers are a critical consumer issue that can no longer be ignored, and it’s up to the industry to ensure savers can make better, more informed decisions.

We’re deeply committed to protecting savers and transfers are just one of the ways in which we are advocating for change to protect savers and drive better default outcomes for consumers.

Patrick Heath-Lay is chief executive officer of People’s Partnership, provider of The People’s Pension.