Standard Life wants the Government to indemnify providers against potential compensation claims if customers suffer detriment as a result of its decision to pursue a “pot follows member” automatic pension transfer system.
Last month, the Department for Work and Pensions published a consultation document confirming plans to introduce a new system which will mean pension pots will eventually move with employees automatically when they change jobs.
The Government is consulting on four different pension pot limits for the auto-transfers system above which the investor would need to actively choose to move their money.
The proposed limits are £2,000, £5,000, £10,000 and £20,000. Pensions minister Steve Webb has suggested the reforms will only apply to auto-enrolment pots.
Standard Life head of pensions policy John Lawson says: “The solution is completely flawed. If someone has a pension with valuable guarantees attached, for example, then an auto-transfer could cost them a fortune. The industry can see the problem of consumer detriment looming but the DWP is insistent on forcing this upon us.
“If the Government is going to steamroller ahead with this then we want a written undertaking that it is going to pay the compensation cost when all this comes to roost, because it will.”
Equity Partners UK IFA Kevin Tooze says: “Automatic pension transfers is a good idea in theory but there is clearly a lot more thinking to be done before it is workable in practice.”
A DWP spokeswoman says: “We will continue to work with the pensions industry and consumer representatives to consider how we might mitigate risk to individuals of automatic transfer.”