The Department for Work and Pensions could scrap controversial plans for the pot follows member model for automatic pension transfers, Money Marketing can reveal.
The DWP is preparing to announce a delay in the reforms until after auto-enrolment has been fully rolled out in 2018.
The Government had originally planned to introduce the initiative on an opt-in basis for the UK’s largest pension providers from October 2016.
Former pensions minister Steve Webb backed the system for automatically moving pension pots of less than £10,000 to employees’ new scheme when they move jobs.
But critics of the system say fundamental flaws persist – such as the difficulty of physically moving millions of pots – and that a virtual aggregator is the better option.
A source close to the DWP says: “There is an announcement coming shortly that will be to the effect that pot follows member is too difficult, the baton will passed to the industry in the form of the pensions dashboard which will try to do the same thing but by a different route. I doubt Ros Altmann is prepared to fight this, with a change in minister it is dead.”
The FCA has called on providers to develop the so-called pensions dashboard, where members can see all their pension savings in one place. This week the Treasury ruled out the Government taking a leading role.
Hargreaves Lansdown head of pensions research Tom McPhail says: “Pot follows member is fundamentally inconsistent with the pension freedoms.
“An alternative solution which works better for individuals, saves costs and minimises the impact on employers can be developed quite quickly. The change of government has presented an opportunity for a rethink, I sincerely hope that the DWP and Treasury will make the most of it.”
IoD senior adviser on financial services Malcolm Small says: “If pot follows member is no longer on the table there will be solutions found for the same objective. If you look at Australia there is IT that can help people identify all their pension pots in one place.
“The industry will have to sort this out.”
A DWP spokesman: “Baroness Altmann has set out her immediate priorities, which include ensuring the continued smooth roll-out of AE to smaller employers and improving public understanding of state pension reform.
“The detail and timing of the Government’s next steps on automatic transfers remain under consideration and will be announced in due course.”