Aviva has urged the financial services industry to support Government efforts to introduce a ‘pot follows member’ automatic transfer system for small pension pots.
Proposals to introduce a system where automatic enrolment pensions below a certain size follow a person as they switch jobs have come under fire from politicians, insurers, consumer organisations and trade unions.
Experts are concerned an auto-transfer system will cause consumer detriment if, for example, someone is transferred from a low-charge scheme to a high-charge scheme.
It is also unclear who will pay for the infrastructure needed to facilitate auto-transfers.
Aviva says the industry should develop a “traffic light” system to alert employees to the risks of transferring their pension. Money Marketing first revealed the ABI was developing such a system with providers in June.
Aviva UK and Ireland Life chief executive David Barral (pictured) says: “The pot follows member approach makes it simple for employees to see in one place the value of the pension savings they have accrued with different employers.
“We believe this will encourage employees to take more interest in choosing investments and in tracking performance, particularly given how easy this is online.
“The industry should work together to agree common standards to avoid employees losing valuable benefits from previous schemes.”
Aviva warns transferring small pots into a central aggregator scheme such as Nest, the approach favoured by Labour, would lead to a lack of competition and diversity and would present a “significant risk” to individuals and the UK economy.