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Cross-party heavyweights slam pot follows member reforms

The Government is pushing ahead with its pot follows member reforms despite the plans coming under attack from influential cross-party peers. 

Under the reforms, pension pots of £10,000 or less would move with a worker when they change jobs in order to stop dormant pensions being left with old employers.

During the Pensions Bill report stage in the House of Lords last week, former FSA chairman Lord Adair Turner, former pensions minister Lord John Hutton and former cabinet secretary Lord Andrew Turnbull all attacked the plans.

Lord Turner said pot follows member should not go ahead unless there is a clear charge cap in place.

He said: “There is a danger people can see their funds transferred into a higher charge scheme. For example, if someone has been in a Nest scheme paying 50 basis points for default funds but then change jobs where the employer has chosen a higher charge rate of 75bps or 100bps.

“They will have accepted auto-enrolment on the basis of one set of charges but we have decided, by an Act of Parliament, to transfer them to higher charges.

“It does not just have a marginal effect but a massive effect.”

Lord Hutton said he does not want to “torpedo” Government reforms but that ministers needed to take a step back to assess whether pot follows member is the right choice.

Cross-party peer Lord Turnbull added the Government should “rethink” its plans.

Labour pensions spokeswoman Baroness Maeve Sherlock said: “If I was sitting where Lord Freud was sitting and this pantheon of pensions experts were sitting opposite me telling me I was wrong then I would be pausing.”

Labour again tabled an amendment for a central aggregator, where dormant pension pots are transferred to a third party scheme.

It has repeatedly called for the aggregator model to be considered alongside the pot follows member approach during the Pension Bill’s passage through parliament.

Department for Work and Pensions minister Lord David Freud defended the policy and fought off a Labour vote by 252 votes to 201.

He said the aggregator model was backed by a powerful pensions lobby supporting master trusts and could contravene EU rules.

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