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DWP: Pensions ‘pot follows member’ to be run by private vendors

The Department of Work and Pensions has indicated its preferred delivery method for pot follows member reforms will see private-sector IT vendors run the automatic transfer system.

The pot follows member reforms are designed to address the issue of stranded pension pots, with the average UK worker expected to change jobs 11 times during their career.

The DWP says its preferred delivery mechanism is a “federated” model administered by private sector firms.

Other options on the table include a central-government database funded through an increased levy from The Pension Regulator or a system using existing HMRC infrastructure.

Speaking at a Tisa event in London, DWP head of automatic transfers policy in the private pensions policy division Toni Clark says: “This would be an integrated network of databases and registers. It will be the open-standards market option where people will be able to come into the market place and become a provider offering to match pots and move people between schemes.

“It would drive down costs through competition.”

Clark adds the delivery method adopted will need to be reliable enough to ensure pots can be matched accurately between ceding and receiving schemes, without risk of the money being incorrectly transferred to the wrong recipient.

Some firms are working on automatic transfer systems ahead of pot follows member being mandated by the DWP.

Yesterday it was announced that Hargreaves Landown and Cranfords had completed the first electronic pension transfer under Tex minimum standards.

Tex is service agreement that sees participating firms commit to electronic transfer within six days.

Hargreaves Lansdown head of pensions research Tom McPhail says: “If commercial pressures and market competition don’t deliver the right outcomes for investors, it would be naïve to expect that the regulator won’t intervene to force improvements.”

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There is one comment at the moment, we would love to hear your opinion too.

  1. Christine Brightwell 11th July 2014 at 1:14 pm

    I hope the Pensions Ombudsman will have enough staff to deal with the complaints when transfers go astray or an inappropriate destination has hacked into the system and siphoned off the transfers.

    I so want to be positive about this but the risks are just too high.

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