the murky corners of the pensions industry to make sure savers know what is happening to their money. A lack of transparency around the true costs of trading can prevent schemes from securing value for money for their members. We will outline further details on our proposals shortly.” The government will publish its response to the consultation on charges, along with proposals on quality and transparency in workplace pension schemes soon. This will contain further details about the implementation and timing of the measures that have been announced.
Is automatic transfer of UK workers’ pension pots the best way forward?
5 March 2014
The government is facing a growing backlash over plans to push ahead with a new automatic transfer system for workers’ pension pots, with claims it could leave millions worse off.
The Financial Times (FT) writes that under the pot-follows-member proposals pension savings of £10,000 or less would move with a worker when they change jobs, instead of being left with an old employer. With millions of individuals now being automatically enrolled in workplace pensions, the government has warned that without measures to ease transfers, up to 50m dormant pension pots could be created by 2050. But unions, industry, consumer groups and campaigners for the aged have joined forces to express concerns that pot-follows-member, favoured by Steve Webb, the pensions minister, could lead savers into inferior pension schemes. In a letter published in Wednesday’s FT, The National Association of Pension Funds, the Trades Union Congress, Which?, the Engineering Employers’ Federation, and Age UK, call on the government to change its plans. “We are very concerned that the government is moving far too quickly to prescribe a system for automatically transferring pension pots every time a person moves jobs without having fully worked out how to safeguard savers’ interests,” said the jointly-signed letter. “Alternative proposals have been made to manage a number of these risks but these, like ‘pot follows member’, require more detailed thinking.” The organisations warn under current plans, there was a danger of savers’ pots moving from well-run schemes to ones with higher charges and less robust governance. “Savings could be switched out of investment assets into cash and then reinvested from cash into investment assets every time the member changes jobs and joins a new pension scheme, thus exposing savers to repeated transaction costs,” said the letter. The organisations are calling on the government to accept amendments to the Pensions Bill, tabled in the Lords, which will see alternative proposals considered. The amendments are backed by three Labour peers including Lord Hutton, former cabinet minister and head of an independent review of public sector pensions. A model, put forward by Labour, would see a dormant pension pot automatically transferred to a third-party pension scheme rather than to the new employer, when a worker changed jobs.
However, this “aggregator” approach was rejected by government in preference for pot- follows-member, due to the possibility that it could increase the number of pots.
“The government should adopt our solution which would be to only allow automatic transfer of pension pots into large-scale, low-cost pension schemes with a legal duty to prioritise the
CIPP Policy News Journal
16/04/2014, Page 446 of 519
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