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Steve Webb sets out ‘opt-in’ auto-transfer pension plans

The Government’s automatic transfer reforms will initially be rolled out on an “opt-in” basis with 20 of the UK’s largest pension providers, pensions minister Steve Webb has told MPs.

Speaking at a DWP committee inquiry into auto-enrolment yesterday evening, Webb revealed members will need to make an active choice to participate in the “pot follows member” initiative. He says the majority of the market will be covered by the reforms within 18 months of its launch.

The Government is to reveal detailed plans next month on how its solution to the problem of small pots will work in practice.

In December, the Government said the system would be launched in autumn 2016.

Speaking in Parliament yesterday Webb said: “We want to get this thing up and running. We think the best way to do this is to start with the biggest providers, covering 90 per cent of the market. They will get the infrastructure up and running.

“We will do it on an opt-in rather than an opt-out basis. Eventually money will follow you by default, but to get the thing going – because there are issues about pension liberation and matching pots that are slowing us down – we will do it on an opt-in basis.”

The DWP’s solution to the problem of thousands of forgotten “orphan” pension pots continues to face criticism from the pensions industry, many of whom favour the alternative option of a centralised aggregator.

But Webb said industry working groups support the plans: “There is far more consensus on this than meets the eye.”

The Government’s chosen option will use private companies acting as pension databases to facilitate transfers when a member switches jobs to ensure their savings follow them.

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Comments

There are 11 comments at the moment, we would love to hear your opinion too.

  1. In principle, based on what is quoted in the article I think this good, but I defer a final opinion until we see the small print.

  2. stuff the economy I work in finance 13th January 2015 at 10:07 am

    Fantastic news! You decide to move jobs and then find that your previous pension which had an SRA of 60 and a 16% GAR has now been moved to a low cost tracker fund with the cheapest provider your new employer could find. Who will be policing these automatic transfers to ensure clients are not worse off?

  3. #stuff the economy I work in Finance (is this by any chance a nom de plume for the Chancellor)

    An excellent point, which I was about to make as well. I would like to add the following points:

    Attitude to investment risk ( does the new scheme have investments similar to the old scheme)
    Transfer penalties (many pension still have these especially if in with profit funds)
    Pensions with minimum income guarantees.
    Existing schemes may have lower charges
    Quality of service

    And lots of other things that advisers have to take into account when recommending a pension transfer will all go by the board.

    I think Steve Webb must be concerned about his constituency seat in the forthcoming election as he seems determined to make big but ineffective noises before the forthcoming election.

  4. After all the stick we get for pension switching and or transfers from the government and regulator, and with all the paperwork and detail (quite rightly) we have to analyse before you consider a switch.

    This all seems a bit slap dash ? and at what cost ?

  5. There is one way to clear all the pension deficits!

    So glad that AF3/G60 was studied and passed just for Steve Webb to say “pot follows member” – looks like IFAs will no longer be required.

    Still at least IFAs may be able to get a job going through all the mis-sold, sorry mis-guided pension transfers.

  6. I suspect that a line will be drawn under how far back the scheme stretches and is more aimed at pension savings going forward. I don’t see plans from the 80’s (and before) being a component part of this when the detail is thrashed out (God willing).

    ATR could be assessed by way of an annual decision-tree being included in review/statement packs, but if the packs run to more than 4 pages then forget the notion of them being read. Let’s face it, most people do not DIY fund management and I would imagine that most auto-enrolment plans will be on a lifestyling basis as the default investment strategy (If you want cheap then you get what you pay for).

    The idea has merit but at present is no more than a political sound-bite and in fairness, it’s probably not the average adviser’s market under RDR!

  7. Reading the article and the fact that he was speaking at an AE inquiry, surely he is referring to ARE funds only. Seems to make sense if you have AE that the funds follow you,

  8. I agree with Gordon – I presume this will apply to QWPS and therefore there can be assumption there will be no exit penalties, GARs, terminal bonuses etc to consider…. the only danger is risk but that can be tackled.

    All in all, seems to make sense.

  9. There is one way to clear all the pension deficits!

    So glad that AF3/G60 was studied and passed just for Steve Webb to say “pot follows member” – looks like IFAs will no longer be required.

    Still at least IFAs may be able to get a job going through all the mis-sold, sorry mis-guided pension transfers.

  10. As I said, the devil will be in the detail.

    1. He wasn’t talking about final salary pension transfer for which you have to have AF3 or equivalent.
    2. He said it’s on an opt in basis i.e. conscious decision for port follows member and not auto follow.
    3. he said “the best way to do this is to start with the biggest providers, covering 90 per cent of the market. They will get the infrastructure up and running”
    4. RU64 still applies and came in in 2001
    based on that pretty much any plan sold post 2001 should be fairly clean and transferable and if NOT, then the original adviser may be the one in trouble if they can’t justify why they didn’t use a stakeholder at the time.

    Common sense (I know that doesn’t often go in the same sentence as politician or regulator) would suggest they can put in simple provisos i.e. all schemes post 2001 schemes (so should be stakeholder friendly at least).

    All the scheme we established for employers and their staff are single charged stakeholder friendly or were changed to such between 2001 and 2003 so I think this is a good idea, just needs some careful planning and thought to remove the outliers for who pot follow member whether opt in or opt out will not be wise and need to be stopped and encouraged to take advice.

  11. stuff the economy I work in finance 13th January 2015 at 5:26 pm

    @ Phil Castle, you points are both valid and logical . My concern is that in the time it has taken you to write your comment you have already given this more consideration than Mr Webb did prior to making his.

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