A new system to stop workers from losing small pension pots when they change jobs has been put on ice as the government said it was not “the right time” for the reform.
Last year, Guy Opperman, the pensions minister, said he was considering resurrecting proposals that would enable pension pots worth £10,000 or less to follow an employee automatically when they moved to a new employer.
The so-called “pot follows member” system was supposed to have been rolled out in 2016, as millions of workers were automatically enrolled into company pensions, potentially building up multiple pension pots over their careers.
But the measure was shelved after opposition from industry, which argued the system was impractical and could see some members shifted to inferior company pensions.
In a response to a written parliamentary question, this week, Mr Opperman said now was “not the right time” to implement automatic transfers because the industry was already dealing with a number of changes. The government’s priority for private pension savers in 2018, he added, was the successful rollout of automatic enrolment.
“[Pension] scheme managers and trustees are focused on preparing for compliance with the [master trust] authorisation and supervision regime introduced by the Pension Schemes Act 2017,” said Mr Opperman.
“These reforms increase the number of people saving into workplace pensions and ensure confidence in the system. Government, providers, employers and members should focus on these changes. It is therefore not the right time to implement automatic transfers.”
Mr Opperman said those with a “defined contribution” pension pot had a statutory right to transfer to another pension scheme of their choice and can use the Pension Tracing Service to identify pension pots they have accumulated with former employers.
Stephen Lloyd, Liberal Democrat pension spokesperson, lambasted the government’s announcement on automatic transfers as “incompetent”.
“Sadly when the Lib Dems left the government in 2015, this sensible and practical idea which would have made such a difference to so many people was scotched by the Tories,” said Mr Lloyd.
“Truly I do not understand why, as a political party, they have a reputation for economic competence, because scrapping ‘pot follows member’ is incompetent.”
Meanwhile a groundbreaking tool to help consumers keep track of their pensions was also set to be delayed after the government missed a deadline to produce a feasibility report on the pensions dashboard.
The feasibility study on the tool, which would allow savers to see all their pensions in one online hub, had been expected at the end of March, as part of plans to launch the dashboard in 2019.
However, the DWP report was not published by the March deadline, with the government now saying it will be released in “due course”.
“The pensions dashboard is an ambitious project and it is important that the needs of consumers and industry are fully considered,” said the DWP.
“We are working with regulators, other government departments and wider industry on the feasibility report which will set out the next stage in this process.”
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