Origo Options Transfers data helps fill Pension Freedoms information ‘black hole’
Total value of pension transfers up by £2bn from April to October 2015.
Data from Origo, the eCommerce and standards body for the financial services industry, is providing useful insight into how consumers are responding to the Pension Freedoms introduced in April 2015 and helping to fill what has been referred to as the information ‘black hole’ on the impact of the new rules.
Origo was established as a not-for-profit organisation to create operational efficiencies and cost savings for the industry in transferring data between organisations. Its Options Transfers service was delivered to the industry in 2008 to cut the transfer time for pension transfers, and has been extended to cover ISAs and GIAs as well as bulk scheme transfers. It has successfully reduced overall transfer times by more than 80%.
Options handles around 95% of contract pensions transfers in the market enabling Origo to provide some useful data on just how the market has changed since April this year.
Headline figures are as follows:
- Total value of transfers increased, with an extra £2bn being moved between pensions and into drawdown between April and October 2015, compared to the previous six months.
- A 6% increase in the average size of pension pot transferred from £46k to £54k.
- Pension to annuity transfers were down 67% over the past year. However this trend may have bottomed out, as numbers have increased over the last four months (see comment below).
- Transfers of pensions into drawdown products since April 15 are up 101%.
- Over the year, transfers into SIPPs are up 36%.
- Pension to pension transfers are up 31% over the year.
Paul Pettitt, Managing Director of Origo, says: “Options Transfers provides automated electronic transfer of pensions into drawdown and annuity products for all the major pensions providers, platforms and employers, handling about 95% of transfers in the contract pensions market. As such, our data can provide a good indicator of trends in that market.
“The doubling of transfers into drawdown, combined with the increased activity into SIPPs and between pensions, would suggest that consumers are looking to take advantage of the Pensions Freedoms and are moving their money where they are more able to access it under the new rules, which has resulted in these percentage uplifts.
“What also is interesting is that, following a massive drop off in volumes of transfers into annuities after the Chancellor’s Pensions Freedoms announcement in the 2014 Budget – 80% when comparing Q1 2014 with Q1 2015 data – the latest figures reveal a 35% increase in pension transfers into annuities since Q1 of this year.
“Although pension freedoms have seen more people move towards drawdown products, the figures suggest that there has been a partial return to the security that annuities offer. Clearly, we are at an early stage and, from statistical perspective, at least another six to nine months data would be needed to be sure about this trend.
“In terms of transfer times, the long standing average remains at 6 calendar days, however this has risen to 8 calendar days since April 2015, largely due to the impact of Pension Freedoms as safeguarding benefit checks take place within Option’s measured timescales. The fastest transfer time so far in 2015 has been 55 minutes 35 seconds.”