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.