The Government is set to come under pressure to change rules that stop insurers from automatically changing a default investment fund on behalf of pension scheme members.
Legal & General pensions strategy director Adrian Boulding says the rules governing contract-based providers mean they are unable to switch the default fund without getting an individual member’s permission first.
He says providers and trade bodies are planning to lobby policymakers to hand insurers the power to change default funds for existing members on an “implied consent” basis.
Boulding says: “In the contract-based world, providers can change the default for new members but existing members each have to make the change separately. We or the employer will write to them, but only about 20 per cent are changing.
“There is increasing pressure from industry bodies on this. It would need a legislative change to give the insurer additional powers.”
Scottish Widows head of pensions market development Ian Naismith says: “This is something we would support. There should be no difference between trust and contract-based schemes.”
A DWP spokesman says: “As part of our work on scheme quality we are examining a number of issues relating to governance and investment.
“We plan to publish a call for evidence in due course, which will cover both trust-based and contract-based schemes and explore how both can achieve good outcomes for savers.”