Pensions minister Steve Webb says he expects transfer fees under pot follows member reforms to be “trivially cheap”.
Speaking at the Tax Incentivised Savings Association annual conference in London this week, Webb raised the issue of transfers between auto-enrolled defined contribution pension pots.
Under Government proposals, a member’s pension pot will automatically transfer to their new employer’s scheme when they move job, aiming to prevent the build-up of small pots.
He said: “Part of this agenda is that there will be tens of millions of small pots collected which gives you scale and we absolutely have to drive a cost effective transfer mechanism.
“There is absolutely no reason why transfer of a DC pension pot in auto-enrolment to another DC pension pot under auto-enrolment should not be trivially cheap.
“We are working with the industry to make sure it happens because the last thing we want is a small pension pot transferred and half of it goes on fees.”
Webb highlighted a Department of Work and Pensions impact assessment showing the industry will save billions of pounds from the reform.
He said: “It will not be left shepherding a large number of pots of silly amounts of money so there is huge gain here for the industry. We need to work with them to make sure we do it.”
Legal & General pensions strategy director Adrian Boulding says: “We have a lot of work to do but if it the legislation is all done successfully then we should have trivial transfer costs of between £1 and £10. Those can then be absorbed within the annual management charge and not charged to members each time they move.”