The Coronavirus pandemic has had the unforeseeable effect of a growing interest in responsible investment from pension savers, leading some workplace pension members looking to make changes to the funds they are invested in. This insight looks at who can perform fund switches or redirections, and how they go about it.
As expected, our data shows that all workplace pension providers are able to perform fund switches or redirections by the scheme member. This services comes at no additional charge and there is no limit to the number of switches which can be carried out.
The picture for fund switching by an adviser is more complicated. Our data shows that 68% of workplace pension providers are able to perform fund switches or redirections instructed by an adviser.
Trustees also have restricted ability to perform switches. Our data shows that 68% providers will perform fund switches or redirections for trustees.
The table below shows the methods by which these switches can be requested.
For all providers online switching is processed via back end automation and can be done as a signature free process. Only Royal London have placed timing restrictions on processing switches online.
Electronic confirmation of the switch are sent out by all workplace pension providers other than by Standard Life DC Master Trust. The remaining providers all send out electronic confirmation messages to the member. Almost two thirds (73%) will send an electronic confirmation to advisers when they make the switch and 47% will send electronic confirmation to trustees.
If the member makes the switch themselves, our data shows that only 32% of providers will notify any adviser connected to the account. Aviva, Mercer Master Trust (Aviva), Royal London and True Potential will all create an electronic message and send to the adviser.
One danger of allowing a member to make fund switches without notifying the adviser is that they chose a fund which does not match their selected attitude to risk and the adviser has no clue they have done this. Our data shows that 63% of workplace pension providers are not able to identify if a member chooses a fund which does not match their selected attitude to risk, however those who can are Fidelity, Fidelity Master Trust, Mercer Master Trust (Scottish Widows), Scottish Widows, Scottish Widows GSIPP, Scottish Widows Master trust and True Potential.
True Potential is the only provider for whom the adviser is notified when such a selection is made.
For 47% of providers, the adviser organisation also has the ability to restrict access to online switching. Aviva Designer, Aviva My Money, Aviva My Money Master Trust, Fidelity, Fidelity Master Trust, and Mercer Master Trust (Aviva) can all restrict access to online switching for both members and trustees. Legal & General, Legal & General Master Trust and Royal London only allow advisers to restrict access to online switching for members.
One area where there is differentiation between providers is the period of which the client is out of the market when making a switch. For members with the majority (89%) of providers they are not out of the market at all.
For members of Hargreaves Lansdown schemes, they are out of the market between the valuation point of the fund that is sold and the purchasing of the new fund unites (typically one day). Members of a True Potential Scheme will be out of the market when making a fund switch for roughly 8 to 10 working days.
Other than Hargreaves Lansdown, our data shows that all workplace pension providers offer a bulk member process for switching accumulated funds. This can be done with either electronically or manually for most, however Aegon Master Trust and True Potential only offer this electronically.
All providers are able to offer a bulk member process for redirecting future contributions. Most can do this electronically or manually. Once again, Aegon Master Trust and True Potential only offer this electronically.
It remains to be seen whether the increased interest in responsible investing will lead to a long-term increase in the number of savers engaging with their pension investments. Whilst someone may express strong values in their everyday purchase choices, these do not necessarily translate into action when it comes to their pension saving.
Our analysis shows that should workplace pension scheme members start wanting to make more changes to the funds in which their fund is invested, whilst all providers will be able to facilitate this, some make it easier than others.