Pensions minister Ros Altmann has confirmed the Government has scrapped plans to roll out an automatic transfer system for small pension pots.
Money Marketing revealed last month the Government was considering axing the controversial plans, which would have seen pension pots of less than £10,000 automatically moved to employees’ new scheme when they change jobs.
In a written ministerial statement, published today, Altmann says the changes to the state pension and pension freedoms meant the market “needs more time and space to adjust”.
The statement says: “All these reforms will increase the number of people saving into workplace pensions, introduce new freedoms allowing savers to access their cash, and implement a new state pension that will be far easier to understand in the future.
“However, we are conscious of the need to ensure Government, providers, employers and members are able to focus on these changes to ensure their success.
“That is why we have decided that the time is not right to implement defined ambition, collective benefits and automatic transfers. The time is not right to ask the pensions industry to absorb the new swathe of regulation that would be needed to make such further reforms work effectively. The market needs time and space to adjust to the other reforms underway and these areas will be revisited once there has been an opportunity for that to happen.”
Former pensions minister Steve Webb says while delaying the pot follows member and defined ambition reforms is understandable, the underlying challenges remain.
He says: “You have all these people to go through auto-enrolment and you have a new state pension and you have to work to make sure the broader freedoms land successfully.
“Inevitably those are the things you want to continue with, and you need the industry to focus on those things too.
“The reservation I have is that you have to put down some foundations for the long-term at some point.
“The proliferation of small pots and all the risks of provision going on to individuals aren’t going away. At some point we will have to address both of those.”