Pot follows member architect and former pensions minister Steve Webb says the delay to pensions’ automatic transfer system is “not outrageous”.
Last week, Money Marketing revealed the Department for Work and Pensions could scrap the controversial plans as part of a delay that is set to see a solution shelved until 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, but now the DWP wants to wait until auto-enrolment has been fully rolled out, Money Marketing understands.
A source close to the DWP says: “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.”
In February 2014 Webb said the industry had to “get on with it” to enable people to “build up worthwhile pots in a single place.”
But now he says new pensions minister Ros Altmann is right to focus on other issues.
He says: “Clearly if you’re the new pensions minister in May 2015, the three big priorities are landing auto-enrolment safely for small firms, seeing the new state pension in and the pensions freedoms work.
“Small pots have to be fixed at some point, but there’s no huge detriment in not doing it today.”
In office Webb backed the system for automatically moving pension pots of less than £10,000 to employees’ new scheme when they switch jobs.
But critics of the reform say fundamental flaws persist – such as the difficulty of physically moving millions of pots – and that a virtual aggregator is the better option.
Webb says: “If the industry is saying for the next two years we’re going to be completely committed to getting the small firms in, we could do without pot follows member now, that’s not an outrageous thing to say.”
He adds the pensions dashboard – a virtual aggregator of pensions savings – should be developed in the meantime.
Former Legal & General pensions strategy director Adrian Boulding – now principal consultant at technology firm Dunstan Thomas – was a pot follows member advocate, but says the delay has created an opportunity.
He says: “Whether you like the solution or not, pot follows member has not gone away and the problem is intensifying.
“Every problem is an opportunity. We are developing software that does what we need, it enables a member to see if their pots in place for the providers who are signed up.
“The pensions dashboard idea has a member benefit, and it also benefits providers. It will enable one provider to discharge the statutory communication duties of all the others, instead of them all paying for postage stamps and sending out statements.”
But Altus director Ben Cocks says the Government cannot wait until 2018 to start thinking about how to collect small pots.
He says: “It needs to be more urgent. If you wait for another three years before you start thinking about dealing with the small pots problem and then it takes two or three years to implement, that’s quite a build up of small pots.
“Aiming to implement for the end of auto-enrolment would be OK, but not waiting to start to think about it then. Then it’s the next Government’s problem.”
Pot follows member – a long road to nowhere
July 2012: Pensions minister minister Steve Webb confirms the Government plans to introduce a system where auto-enrolment pension pots move automatically when a person changes jobs
September 2012: Money Marketing reveals the industry is refusing to pick up an estimated £40m tab for setting up a “central information hub” to support the reforms
April 2013: Govt says auto-transfer plans will only apply to pots worth less than £10,000 and will be restricted to “pure” DC – excluding those with valuable guarantees attached
October 2013: Webb rejects alternative ‘one member, one pot’ reform proposed by Hargreaves Lansdown and Aviva. Under the proposal, an employee’s new employer would automatically pay contributions into their old pension scheme, thus removing the need for a transfer to take place
March 2014: Money Marketing reveals Labour plans to scrap pot follows member in favour of a “central aggregator” model if elected
January 2015: Webb reveals the reforms will initially be rolled out on an “opt-in” basis with 20 of the UK’s largest pension providers
February 2015: Govt confirms more details of reforms – only pots which are subject to the 0.75 per cent default fund charge cap and received the first contribution on or after July 2012 will be included in pot follows member
September 2015: Money Marketing reveals the DWP will delay pot follows member until 2018 and could scrap the reforms altogether