Pension transfers matter. They’re often complex and, for many customers, emotionally charged. So, it’s no surprise that the Financial Conduct Authority is taking a closer look at how people who don’t have a financial adviser can transfer their pensions.
Last month’s FCA consultation paper, CP25/39, is aimed at improving clarity at the point of transfer – helping customers better understand what they’re giving up, and what they’re moving to, before a transfer completes.
At Seccl, we’ve spent the last few years investing heavily in transfer processes that are clearer, more consistent and designed around better customer outcomes. In many ways, CP25/39 reinforces why that work matters. But as with any change of this scale, the detail – and how it’s delivered – will make all the difference.
Why the FCA is acting now
The backdrop to CP25/39 is a pensions market that’s changing quickly.
Over the next few years, pension dashboards and targeted support are expected to significantly increase customer engagement with retirement savings. That’s a positive step. But it’s also likely to drive a sharp increase in transfer and consolidation activity as people trace and reorganise their pensions, at scale.
Alongside this, the FCA has highlighted concerns around some non-regulated ‘trace and consolidate’ services. In certain cases, customers are being pushed into transfers they don’t fully understand, with limited visibility of what they might be giving up along the way.
The regulator’s view is that better information, presented at the right moment, can materially reduce the risk of poor outcomes.
What CP25/39 is proposing
At the heart of CP25/39 is a new requirement: the transfer comparison summary.
Under the proposals, customers making a non-advised pension transfer would be shown a clear, non-biased comparison between:
- the pension they are transferring from (the ceding scheme/provider), and
- the pension they are transferring into (the receiving scheme/provider)
This comparison is intended to cover key features, costs and benefits on both sides, helping customers answer a simple but crucial question: is this transfer right for me?
Importantly, the FCA isn’t trying to tell customers what to do – but to make sure they have the information they need to make an informed decision.
A more consistent experience for customers
Done well, transfer comparisons have the potential to materially improve the customer experience.
Today, transfer journeys can vary significantly by provider and scheme type. Information is often fragmented, inconsistent or presented too late to be genuinely helpful.
A standardised transfer comparison summary sets a clearer baseline. It gives customers a fair, balanced view of the trade-offs involved, cutting through inconsistent information and keeping the focus on the facts of the decision.
From a market perspective, that kind of clarity and consistency is a positive step forward.
Potential pitfalls
As with any regulatory change, the outcome will depend on how the rules are applied in practice. And while we support the overall intent of CP25/39, there are areas where we think the current proposals risk unintended consequences.
Scope and fairness: first, it’s important that these rules apply consistently across the market. Implementing them only for FCA-regulated schemes risks creating an uneven playing field. Applying different standards depending on scheme type would be unfair and undermine the policy’s effectiveness.
Digital delivery and transfer times: Comparisons are great – but only if they’re delivered digitally. A manual approach risks adding significant delay to transfer journeys. In our view, that could mean an additional three weeks in some cases, which doesn’t feel like a good outcome for customers and risks putting off customers altogether.
The proposed two-week timeframe to exchange information between schemes is too long for the majority of transfers. Most providers should be able to share this data upfront using established electronic transfer messaging services, enabling comparisons to be produced immediately, or at least within 24 hours.
That points to a more proportionate approach. We think there’s a clear distinction between:
- schemes that can be electronically supported, and
- genuinely complex or legacy schemes that require manual handling
Longer timelines may be appropriate for the latter. But applying the same maximum timeframes to all schemes risks baking unnecessary delay into otherwise straightforward transfers.
How fees are compared: we think there’s more work to do on how fees are treated within comparisons. Clearer rules are needed to ensure fair comparisons between schemes that package charges in different ways. For example, including asset management or fund charges risks creating conflicts of interest and pushing customers towards the lowest headline price, rather than solutions that are appropriate for their needs or long-term outcomes. Comparisons should inform decisions – not distort them.
Process complexity and cost: finally, implementation matters. The cost and complexity of delivering these changes is likely to be higher than the FCA’s estimates, particularly where firms need to integrate with external systems providers to build end-to-end solutions.
Rushing implementation before digital integrations are in place could negatively impact a large number of customers. Allowing enough time for providers to build robust, automated solutions will be critical if the majority of straightforward transfers are to remain efficient. Not doing so could risk widespread disengagement and negative customer outcomes.
Timing and next steps
The consultation closes on 12 February, with final rules expected later this year. Given the scale of change and the system impacts involved, implementation is likely to follow in 2027 or beyond.
Between now and then, there’s an important opportunity for firms to get involved constructively. We’re already doing deeper analysis internally and engaging through industry forums to help shape the conversation, but digital solutions will be critical to finding effective solutions.
Getting the balance right
CP25/39 has the potential to raise standards across non-advised pension transfers. But good intent alone won’t be enough.
For these proposals to work, they need to be applied consistently across all types of pensions, delivered digitally by default, and implemented at a pace that allows firms to build the right infrastructure. Manual processes and extended timelines should be the exception – not the norm.
That’s the balance we’re advocating for: clearer information, fairer comparisons and modern transfer infrastructure working together. If the industry gets that right, CP25/39 won’t just reduce customer harm – it will materially improve how pension transfers work for everyone.
