Ben Cocks
TeX Open Transfer Improvement for 2019
Written by Ben Cocks on
Plans are now in place for significant improvements to the open transfer framework.

After three years of consolidation (or stagnation, depending on your point of view), plans are now in place for significant improvements to the open transfer framework. This should alleviate some of the current shortcomings in the industry’s transfer services and will be in production by November 2019.

As a reminder, the open transfer framework comprises:

  • A contract club and service level governance from TISA Exchange (TeX)
  • Open technical standards based on ISO 20022 from the UKFMPG
  • Multiple interoperable and competitive technology solutions

Between 2012, when open transfers first went live, and 2016, the framework rapidly progressed from simple ISA and fund transfers to cover a much wider range of transfers including pensions, equities and sub-custodians. This resulted in a two-speed market of those keeping up with this rapid progress and those who, for various reasons, chose to stick with the original basic version. In 2016, TeX members reached a compromise whereby the pioneers agreed to tread water until 2019, provided the laggards upgraded to the latest version.

With 2019 fast approaching, the final scope of the new standard (v3.1.1 if you’re interested) has now been agreed by TeX and UKFMPG. The key new features to be included are:

  • More sophisticated support for in-specie SIPP transfers with ring-fenced assets in drawdown (a subject complicated enough for its own blog)
  • Junior ISA (JISA) transfers, including transfers from Child Trust Funds (CTF) to JISAs
  • Lifetime ISA transfers
  • Conversion instructions to allow restricted share classes to be converted and transferred in-specie rather than sold (although sadly not the ability to automate the conversion instruction to the fund manager)

All these features will be useful but the most important benefit is that all TeX members will be talking the same language, thereby maximising the number of transfers that can be automated. Ultimately this will provide a better service for customers and encourage competition in the investment market.

But we have not reached the final destination for open transfers by any means. Most notably, the BACS Cash ISA transfer service and Origo Options cash pension service cannot interoperate with TeX open transfers. This inevitably means that many customer transfers fall down the cracks between incompatible services and causes the variability in customer service levels that the FCA has noted.

There are also some improvements that would undoubtedly further improve transfer services but did not make the cut this time. These include the automation of conversion instructions to fund managers and support for foreign exchanges and securities depositories. Hopefully a further update to the standards will address this in the not too distant future.

And now that more people are beginning to understand the importance of open standards and interoperability in the drive for innovation and competition, we can expect to see the TeX model being adopted to address a range of challenges from funds trading to the pensions dashboard. Undoubtedly 2019 will be just the start of more change rather than the end.

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