Pensions minister Steve Webb has threatened to “name and shame” providers who do not introduce measures to prevent people being automatically enrolled into poor value schemes.
Earlier this week, Aviva issued a statement committing to only use “modern” schemes with low-cost charging structures for auto-enrolment.
In a wide ranging speech, Webb told delegates at the National Association of Pension Funds conference in Liverpool he would publicly criticise insurance companies who allow savers to be auto-enrolled into “dodgy” legacy schemes.
Webb said: “If we are convinced the market will deliver quality for everyone then we will not need to intervene. Aviva are saying they will not allow employers to automatically enrol their workforce into a dodgy old scheme, they will create a new scheme instead.
“That is one insurer saying it will not auto enrol people into dodgy schemes, but what about the rest? I want every provider to guarantee not to enrol people into high cost legacy schemes.
“I will name and praise anybody who does it, and name and shame anybody who doesn’t.”
Webb also indicated a forthcoming paper on reinvigorating occupational pensions, due to be published before Christmas, will investigate how the Government can encourage greater scale in the pensions market.
He said: “I have huge sympathy with the points the NAPF is making about scale. We do need to get on with scale and our consultation document on reinvigorating occupational pensions will touch on the issue.”
In addition, the pensions minister also set out plans for “time limited DB”. Under the proposal, the member would accrue DB benefits when they work for a company. The fund would then be converted to DC when they leave.
“We are looking at the idea of ‘time limited DB’. It would provide defined benefits when you work for a company and becomes DC when you leave.
“It would mean the firm isn’t exposed to investment risk, inflation risk or longevity risk because the DB promise ends when the worker walks out of the door.”