Steve Webb sets out the options for small pension pots
The Department of Work and Pensions is set to publish a consultation paper on consolidating smaller pension pots next month.
Speaking at the Personal Finance Society annual conference in Birmingham this morning, pensions minister Steve Webb (pictured) said the DWP will be consulting on the different models that could be used to aggregate smaller pots.
He said some of the models being considered include the pension pot moving with an individual as they change jobs, or alternatively on changing jobs the pension pot gets left behind and, unless the individual opts out, the money would be automatically transferred to a central aggregator fund.
Webb said: “The idea is that instead of having all of these fragmented pots that do not buy people pensions, there is one big packaged pot.
“Firstly that raises the visibility of pension saving. People would see a figure of £20,000 rather than 10 figures of £2,000, which makes them think more about what you can get for it. And then at the point of turning it into a pension they get better value for money.
“We already know that schemes, occasionally slightly carelessly, lose people. All the hassle is taken out is if we can have consolidation of smaller pots in some way shape or form. So we will be consulting on that next month.”
Webb also repeated his support for strategies to increase pension contribution levels, such as Save More Tomorrow, an initiative aimed at getting people to pledge future increases in salary towards their pension provision.