By Daniel Hunter
Plans to make it simple for people to take their work pension with them from job to job have been published today (Tuesday).
Current rules make it difficult for people to combine their pension pots as they move jobs, leaving money stranded or lost completely. Without action 50 million pension pots could sit dormant by 2050.
Creating a system in which small pots follow people through employment is the preferred approach among savers, according to a recent survey by the Association of British Insurers.
Announcing that the Government will develop a 'pot follows member' design, Minister for Pensions, Steve Webb said:
"We need a system where people build up worthwhile pension pots in one place rather than having lots of small pots all over the place. But at the moment every time someone moves to a new job there is a risk that they leave behind a small pension pot which they lose track of. Our plans will mean that individuals get better value for their savings and bigger pensions as a result.
"Automatic enrolment will help millions of people save into a pension, with a contribution from their employer. Our overall goal of getting millions more people saving would be completely undermined if people are let down by a set of rules that mean people lose track of money saved and miss out on vital income in retirement."
The Department for Work and Pensions consulted on approaches, including a suggested central aggregator. The 'pot follows member' model will give far greater levels of consolidation and could halve the potential number of dormant pots by 2050.
It would also provide the best reduction in administrative costs for pension providers in the long run, potentially offering further benefits for savers in the form of lower charges.
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