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Categories:Pensions

Steve Webb sets out the options for small pension pots

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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.

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Readers' comments (8)

  • A perfectly sensible proposal. Now try fitting it to the rules set out by the FSA re pension switches and transfers. Result - instant crash and burn. Nevermind, the consultation will keep everyone busy at least.

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  • It is s super idea but until the other regulators sort out their historic mess on pensions transfers which have made it a flipping maze to do anything then this just wont change. he needs to flip off and have a flipping shower in the waters of reality

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  • Top Idea
    Inconcevable it will work
    Time will tell
    Save us Steve

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  • sadly he has no idea on the web (no pun intended here ) of legislation his government and prior rule makers have created

    why do you need to consolidate these ....surely it will only be a matter of time before we get a unniversal sign-on where people can get an aggregated view....and yes it might be 5 years awa, bt given the speed at which things happen i would favour this instead

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  • Steve Webb is the one shining bright spot in a pretty vile government.

    He's probably the first Pensions Minister who has properly mastered the brief and actually seems genuinely interested in his subject rather than seeing it as a stepping stone to higher office.

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  • Strummerville

    -------

    Ayes its true. compared to Labour's 18 pensions ministers in 13 years (while in power) and 4 shadow ministers in 2 years (since leaving power) he has amazing staying power.

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  • he hasn't yet mastered the art of keeping his powder dry

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  • A bizarre idea. In order to make it work the pension pot can only ever be with one company, which may or may not be competent at administration and/or investment ability.
    It destroys the concept of competition since most companies know they will be receiving bundles of money each year that they do not have to fight for.
    It will also increase the level of administration, and who would suggest that insurance companies are models of administrative competence. The opportunity for mistakes will rocket.
    The market has been screaming for years for improvements in this area, but mainly to little long term effect. And the FSA are too incompetent themselves to know how to deal with this matter.
    And what is a "small pot" and why does it have precedence over a medium or large sized pot. And what it you have a mixture of all three.
    There is absolutely no problem with having a multitude of pots - people should accept a certain level of responsibility for their own financial management - it quite possible to consolidate pensions under current rules. Compulsion to amalgamate appears to be a bizarre suggestion from the "Party of Free Enterprise"!
    The real problem arises at retirement when they are brought together as an annuity. That is the problem because most companies are a total disgrace at releasing the money in a realistic time scale.
    This problem could be handle relatively easily. Firstly, companies providing annuities must be licensed. This would eliminate those pension fund providers who provide poor annuity rates because it is a chore rather than a part of the business strategy, and therefore can't be bothered. It would also ensure that the OMO has to be taken up in more cases.
    Secondly, quotations to be valid for 28 days. Thirdly, companies who do not complete a transfer, accurately, within that period to be fined 10% of fund, payable to annuitant, tax free and the charge to be excluded from tax offset by the company. Fourthly, CEO of transferring company to be fined if there are more than 10 breaches in any 12 month period.
    There is also a fifth point that needs to be addressed, but I will let others ponder that and possible solutions.

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