Personal PensionMay 15 2013

Webb promises ‘cheap’ annual small pot pension transfers

Search sponsored by

Pensions minister Steve Webb has pledged to make the government’s plans for a ‘pot follows member’ work in practice by bringing in rules for “cheap” transfers that would be reconciled by providers on an annual basis.

At a seminar run by The Pensions-Net-Work, hosted by Legal & General, Mr Webb admitted that although small fragmented pots “obviously bother us a lot”, the industry has to “stop whingeing” and engage with the government to develop workable plans.

In particular, he suggested that the government would seek to make the process efficient by allowing providers to “reconcile” pots on an annual basis, which would prevent them having to facilitate several transfers if individuals move jobs frequently, or move back to a past employer.

Last month, the government published plans to force automatic transfers by providers of pots worth less than £10,000. At the time the government said it would work with the industry to develop the detail on the proposals.

He said: “It’s pot follows member, we’ve thought it through, we’ve published the law and we are going to do it. So rather than keep hankering back... this is how it’s going to be.

“The challenge now is making it work for all of us. What we are going to do is make transfers cheap and efficient as they should have been anyway.

“Why do we need small pots on transfers to sort out the rubbish of pension transfers? But we are going to do it as we needed to do it anyway.”

He added: “There are things we can do to deal with the hassle.”

Discussing the need for the industry to engage with consumers on pension saving, Mr Webb warned people will not begin making sufficient saving without encouragement from the industry and employers.

He said: “The beauty of inertia is [it is] also the curse of inertia. It gets people in [to auto-enrolment] as they are not really thinking, but it is very hard to get people engaged and saving without engagement.

“And we have used inertia to our advantage to get people in. We then have to engage with people and make sure people get good returns, good governance, good communications and good value for money and then I think we have a chance.

“I remain an optimist about all of this – the signs are very good from auto-enrolment, the legislative framework is coming into place but there is still an awfully long way to go.”