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Aviva and Hargreaves lobby for pensions ‘pot follows member’ alternative


Aviva and Hargreaves Lansdown have joined forces to challenge the Government’s plans to introduce a ‘pot follows member’ automatic transfer system for pensions worth less than £10,000.

In April this year, the Department for Work and Pensions confirmed it planned to press ahead with reforms which will see small pots transferred automatically when a person changes jobs.

The idea has been criticised in some quarters, principally due to concerns people could lose out if their pensions are automatically moved from a good scheme to a bad scheme.

Aviva and Hargreaves have now put forward an alternative ‘one member one pot’ reform. Under the proposal, an employee’s new employer would automatically pay contributions into their old pension scheme, thus removing the need for a transfer to take place.

To make the idea work, scheme members’ P45 would need to include details of their old pension scheme. New employees who do not have a pre-existing pension account would be enrolled into their new employer’s existing scheme.

Aviva corporate benefits head of policy John Lawson says: “I think the DWP could go for this. You do not change bank accounts every time you change jobs and there is no reason why that shouldn’t be the case for pensions as well.

“The technology already exists to make multiple payments to multiple schemes, so there is no reason why you can’t just keep your pot.

“This is a much less wasteful way to go about things because you are not creating huge numbers of transfers and you remove the consumer detriment risks. It also removes the risks associated with building a huge system from scratch to facilitate all these transfers.

“We have all learnt, both the private sector and the public sector, that building systems from scratch is not easy and usually costs a lot of money.”

Hargreaves Lansdown head of pensions research Tom McPhail says: “This idea of arbitrarily moving people’s pension saving whenever they change jobs is contrary to everything we know about behavioural economics. 

“If you want to encourage someone to become comfortable and engaged with their retirement planning, the last thing you want to do is change their pension every time they change jobs; how can you possibly expect them to take an interest in their pension under these circumstances? 

“You wouldn’t force them to change their bank account, so why do it with their pension? 

“We are calling on the government to look urgently at the alternative solution of ‘one member one pot’ as we believe it is a much simpler, safer and cheaper solution to the small pots issue.”


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There are 8 comments at the moment, we would love to hear your opinion too.

  1. the bank account and pension pot argument does not stand up to scrutiny. I am not saying that pot follows member makes sense, just that Hargreaves need to work harder on the argument.

  2. It’s a stupid idea and woeful attempt at protecting self interests. The terms of a GPP are determined, in most cases, by the commercial attractiveness of the sponsoring employer. Why should a former employee continue to enjoy the funds/terms afforded them by their former employer?

    Also, John Lawson speaks of detriment but how can he be sure staying at Aviva isn’t to their detriment – they may have a lower AMC elsewhere?

  3. What is more interesting is that we are a year into auto enrolment and this has not been sorted – poor consumer as usual.

    Steve Webb needs to go in my opinion as this should have been sorted out at least a year before the start of auto enrolment not a year into it.

  4. The idea of individual pension accounts makes sense, but then there should be choice for the individual as to what that account should be, rather than leaving it to be determined by whoever happens to be the first employer they save with. I have long advocated everyone having their own ‘lifetime savings account’ of which pensions will form part, but this could start under auto enrolment with a ‘lifetime pensions account’. Providers would try to attract individuals to their account and the employer’s pension contributions would be paid into this account, just as the salary is paid into their bank account. However, this could not be done immediately as the technology and platforms would need to be designed to work for all employers. If workers refuse to choose an account they could be defaulted into NEST or another approved low charge aggregator scheme that would have to be scrutinised and pass certain approval tests before being accepted as a default provider of lifetime pension accounts. Just a suggestion!

  5. Want to cut out advice by any chance?

    We used to have this wonderful system where your pension pot followed you – it was called SOAP and SERPS which allowed you to build up a pension entitlement based on your earnings through life.

    Comparing banks accounts with pensions is a bit silly by the way. One isn’t regulated whilst the other is.

  6. Ros, what you say is pretty much the vision for this. The technology does exist today and was built to help employers with multiple schemes cope with AE. Only defaulters would have the account determined by #1 employer and all would have the ability to change provider at any time.

    We are only disagreeing over the name “one-member-one-pot” or “lifetime pension account”!

    Sean, you have got more chance of advising someone who is engaged with a £50K pot than someone who is disengaged with 10 pots of £5K. I’m not sure any IFA would want to do that sort of consolidation work at a fee which didn’t eat up a large proportion of the client’s savings.

  7. The individual pots would result in

    – no or little employer negotiated terms
    – additional payroll costs through a need for greater hub functionality
    – little aggregated governance delivered
    – any defined ambition developments being delivered at a retail level
    – would exclude all OPS arrangements etc

    Back to the drawing board for Ros, John and Tom.

  8. Surely the best way to make someone interested in their pension is to promote it as key part of their overall employment package. If a person leaves an employment which has a great pension scheme, and by joining another employer they gain access to a worse pension scheme, then that is part of discussions and considerations? It does remove the ability to transfer pots around which I can see may be a problem for some advisers!

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