Pensions minister Baroness (Ros) Altmann has promised that “pot-follows-member” has not died and it will make a comeback.
Responding to a question from Labour peer Baroness Drake, Baroness Altmann said introducing a system of automatic transfers would be a significant new process for both schemes and members to get to grips with at a time when the pensions market is changing fast.
She said: “The future pensions market could look different from the current one. It is important that any system of consolidation is long-lasting and reflects that future landscape.
“This does not mean that the project has ended, and I am very grateful for the contributions that the industry has made to this project.
“I fully intend to ensure that the insight gathered in our extensive engagement with industry should be applied to the model when work is restarted.”
Pot-follows-member was a system launched by former pensions minister Steve Webb to allow a saver’s auto-enrolment pension to follow them from job to job and was due to come into effect in 2016.
Last month, Baroness Altmann halted the process of introducing the system to allow auto-enrolment to be completed.
On 15 October, Shailesh Vara, parliamentary under secretary of state at the Department for Work and Pensions, highlighted a written statement from Baroness Altmann, the minister of state for the DWP, in which she said there was too much going on for the government to commit to other changes.
The statement said: “The time is not right to implement defined ambition, collective benefits and automatic transfers.
“The time is not right to ask the pensions industry to absorb the new swathe of regulation that would be needed to make such further reforms work effectively. The market needs time and space to adjust to the other reforms underway, and these areas will be revisited once there has been an opportunity for that to happen.”
At the time, David Fairs, chairman of the Association of Consulting Actuaries, said: “With private sector defined benefit schemes mostly closed to new members and, increasingly, to future accrual by existing members, the deferral of defined ambition to an unspecified date means the government must now lay out convincing plans to really boost pension savings over the years ahead.”
Not all of the industry commentators disagreed with the decision, however. Michael Johnson, fellow of the Centre for Policy Studies, congratulated the government for the “decision to scrap the previous government’s pot-follows-member initiative for the automatic transfer of pension pots”.
Jason Witcombe, director of London-based Evolve Financial Planning, said: “It is in no one’s interests to have a lot of small pots of money in different places.
“If you only have a couple of thousand pounds in a pot the pension company is probably not making enough money in administration charges to cover sending out an annual statement.”