New plans are published today that will ensure that money saved into a pension stays in a pension. These are the next steps to getting millions of people saving into workplace pensions.
The Minister for Pensions Steve Webb has today promised to protect the pension pots of people who move jobs often by abolishing Short Service Refunds for DC occupational schemes. These refunds allow individuals to get their pension contributions back - leaving them without a pension.
Steve Webb said:
I want to ensure that as people move jobs, their money stays in pensions. Taking the money out goes against our overall goal of getting millions more people saving.
The Minister also committed to taking action to prevent people losing small pension pots. A paper published today looks to address the complexities in the current system that make it difficult for people to transfer their pension pots throughout their careers into one big pension.
Steve Webb said:
I am concerned that people are at risk of losing their small pension pots as they move from job to job. I do not want to see people who are doing the right thing by saving, ending up with very little for their retirement because the system is too complicated. I want to make it as easy as possible for people to grow big fat pension pots.
A highly mobile jobs market and the introduction of automatic enrolment will lead to around 4.7 million additional small pension pots in our pensions system by 2050.
With the average person working for eleven different employers over the span of their career it’s vitally important that barriers are removed to growing big fat pension pots.
Options for consultation range from small changes to encourage transfers to an automatic transfer system where pension pots could either be consolidated in one or more ‘aggregator’ schemes or move with people from job to job.
Notes to Editors:
The full paper Meeting future workplace pensions challenges: improving transfers and dealing with small pots and impact assessment on abolishing short service refunds can be found here: http://www.dwp.gov.uk/consultations/2011
We have also published today a consultation on the 2012/2013 review and revision of earning thresholds for automatic enrolment here: http://www.dwp.gov.uk/consultations/2011/
We will look to abolish Short Service Refunds for DC occupational schemes in the next Pensions Bill.