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Government confirms plans to abolish short service refunds

Pensions minister Steve Webb has confirmed the Government will abolish short service refunds for defined-contribution pension schemes.

Under current rules, companies can get a refund on employer and employee contributions if a member leaves within two years of joining a pension scheme.

Webb (pictured) says: “I want to ensure that as people move jobs, their money stays in pensions. Taking the money out goes against our overall goal of getting millions more people saving.”

Webb says short service refunds could be abolished as early as 2014.

The DWP is also seeking views on a range of reform options designed to make it easier for people to consolidate small pension pots.

These range from small changes to encourage transfers to an automatic transfer system where pension pots could either be consolidated in one or more ‘aggregator’ schemes or move with people from job to job.

Webb says: “I am concerned that people are at risk of losing their small pension pots as they move from job to job. I do not want to see people who are doing the right thing by saving, ending up with very little for their retirement because the system is too complicated.

“I want to make it as easy as possible for people to grow big fat pension pots.”

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