Pensions minister Steve Webb has hit out at the “vested interests” opposing Government plans to introduce an automatic ‘pot follows member’ transfer system for small pots.
In July last year, the Department for Work and Pensions confirmed plans to introduce a new system where small automatic enrolment pension pots would move with employees automatically when they change jobs.
The Government has yet to decide on a size limit for small pot auto-transfers.
Addressing the Department for Work and Pensions select committee yesterday, Webb (pictured) said the proposals were met with fierce opposition from providers who are “terrified” about losing profitable legacy business.
He said: “This is the one issue where I most encountered the vested interests of the pensions industry. I was astonished by the hornet’s nest we managed to stir up.
“You have all these people with lots of legacy business and they are terrified that all their profits are going to disappear.
“If you are an old firm not writing a lot of new business but you have all this legacy money sitting there, often with very high charges, you are terrified that I am going to stir up your cozy little world and start moving profitable money out of your business.”
Consumer groups and trade unions have also raised concerns about ‘pot follows member’, arguing savers could lose out if they are automatically transferred from a good quality scheme to a poor quality scheme.
Responding to these concerns, Webb said: “The consumer groups have said you can’t just have pot follows member into any old rubbish [scheme], and they are right. But once we have addressed the scheme quality issue, the objection to pot follows member falls away.”