By Daniel Hunter
A new system to stop workers losing their small pension pots as they move from job to job is due to start in autumn 2016.
A new system to stop workers losing their small pension pots as they move from job to job was outlined yesterday by the Minister for Pensions Steve Webb.
The update on the implementation of automatic pension transfers, or ‘pot follows member’, sets out how, under the new system, various small pension pots which a worker may have accumulated from different jobs will be able to be consolidated within their current employer’s pension scheme.
Due to come in from autumn 2016, workers will initially be offered the option of consolidating their pension pots, before an automatic system is rolled out.
Over 5 million employees have already been automatically enrolled into a workplace pension scheme, and this will increase further as small and micro employers are brought into automatic enrolment over the next 3 years.
Minister for Pensions Steve Webb said:
If we fail to take action there could be over 50 million dormant pension pots drifting away from savers by the middle of this century — that’s billions of pounds floating around that should be funding better retirements for people.
Auto enrolment is helping people to save for retirement, but we must help them to keep their pots together so they know clearly that their pension is growing for their future. With the average person now having 11 jobs in their career, this further reform is essential.
I want to introduce ‘pot follows member’ as soon as possible so we don’t lose the momentum that automatic enrolment has delivered in turning around pension saving in Britain.
The update paper follows 9 months’ work with a wide section of the pensions industry to analyse different options to create a safe and efficient model that works in the interest of workers saving for their future.
Under the plans, automatic transfers will first apply to a limited number of larger schemes — covering the vast majority of pension scheme members in the country.
The first stage will introduce automatic matching of an individual’s mini pots.
A person will be contacted to confirm if they want these pots to be moved to their new scheme — with an initial opt-in system introduced first ahead of a full opt-out model.
The aim is to have an automatic pot-matching system in place by autumn 2016.