People’s Partnership: New Index reveals estimated £40.6m loss from pension transfer decisions across Wales

More than £40 million of retirement savings in Wales is predicted to be lost due to savers transferring to higher charging pensions in just one year, according to new analysis from leading workplace pension provider, People’s Partnership¹.

The provider of The People’s Pension recently launched a Pension Transfer Outcomes Index² revealing what UK savers could lose in just one year as a result of decisions made about pension transfers³. Following an analysis of the national data, the provider has now released a regional breakdown of the Index, which shows that savers in Wales could lose £40.6 million⁴.

According to the People’s Partnership’s projections, the predicted loss in Wales has increased significantly in recent years, up from £27.8m in 2021 to £40.6m in 2023. It is warning that this could become an even bigger issue for consumers once pensions dashboards, which will allow people to see all their pensions in one place, go live in just over two years’ time.

The Pension Transfer Outcomes Index is based on movements where people switch from a lower charging workplace pension, which are subject to a charge cap⁵, to higher charging, uncapped, retail schemes, for their lifetime pension saving journey.

People’s Partnership has found that individuals who transfer successive lower charging workplace pensions into a higher cost retail option, could be missing out on as much as 20 per cent of their pension pot by the time they retire. This could mean having to work at least three years⁶ longer in order to plug the gap caused by their transfer decision.

The profit for people organisation is calling on the FCA to apply its Value for Money framework to the whole market, rather than just workplace pension providers. It also wants providers to be compelled to disclose prominently key information to consumers, ensuring they are aware when they are moving to higher charging products.

People’s Partnership recently launched its Pension Overview webpage⁷ which highlights key considerations to be made before transferring a pension, including how much people are charged and recent investment performance. The organisation is calling for other providers to be more transparent by giving savers similar clear information.

Patrick Heath-Lay, CEO, People’s Partnership, said: “It’s incredibly worrying that our modelling shows over £40 million is potentially lost across Wales due to people transferring to higher charging pension schemes. In a region where nearly a fifth⁸ of pensioners are considered to live in poverty, it’s concerning to see such a large sum of money being lost unnecessarily.

“Given transfer volumes are increasing, this could easily cost consumers across the region millions a year more once commercial pension dashboards are introduced. With adequacy of saving levels still a significant factor to future pension policy success this turbo charging of the transfer market will ultimately be to people’s detriment, meaning we need to act now to ensure that they have the information they need to compare their options when considering a transfer.”

The issue is further illustrated by the challenges people face to differentiate between low and high-charging pension options. The People’s Partnership’s research⁹ found that nearly three quarters (72%) of people who had transferred a defined contribution pension in the past two years didn’t know exactly what the fees were for their new pension. One in 10 (11%) didn’t think their new pension had any fees or charges.