The annual cost of the letters of authority process amounts to £442mn a year, according to a report.
Research by The Pensions Lab found more than 3.9mn LoAs are sent annually with an average of 6.5 LoAs sent per adviser.
In a white paper launched yesterday (April 24) The Pensions Lab revealed the sheer volume, wasted time and cost of the LoA process and called for the industry to work together to make improvements to the process.
According to the paper, the LoA procedure takes an average of 130 minutes to process, costing approximately £111 each.
The annual cost of the LoA process is almost double the losses incurred by deferred small pension pots.
Scott Phillips, chief executive of The Pensions Lab, said: “The LoA process is fundamentally flawed and it needs urgent attention. It currently makes the advice and transfer process costly and undermines consumer success in achieving their financial objectives. It’s not good enough by a long stretch.
“In addition to poor customer experience of lengthy delays, which is the most important thing here, financial firms also risk non-compliance with the FCA’s consumer duty rules, which mandate avoiding foreseeable harm and enabling customers to pursue their financial objectives effectively.”
The paper is part of the #LogYourLoAPain initiative aiming to drive urgent reform of the LoA process.
It is supported by nine organisations across the industry including Criterion, Beyond Encryption, Punter Southall, EV, MypensionID, Penny, PensionBee, CATS and Octopus Money.
Research from the whitepaper also found the delivery of pensions dashboard in 2026 is expected to increase LoA volumes eight-fold.
Billy Burnside, managing director of Criterion said, “The Pension Lab’s research into the LoA process has provided valuable insight into the true extent of its impact on both advisers and consumers. With a massive 3.9mn LoAs sent out every year and 10 per cent of these needing wet signatures, it’s crucial that firms take steps towards a more efficient LoA process.
“The drivers for change highlight the main areas the industry needs to come together to resolve, with collaboration the key to driving this forward. By fostering collaboration alongside leveraging standards and technology, we are paving the way for a more streamlined and automated process, alleviating the burdens of managing large volumes of LoAs on a daily basis, while reducing costs.”
Phillips said the LoA process needed urgent attention from the FCA and TPR and a collective commitment from stakeholders.
alina.khan@ft.com
