Regulatory differences in pension schemes to be addressed
This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government
Proposals to address short service refunds, small pension pots and transfers will be put forward by the Government later this year.
Proposals to address short service refunds, small pension pots and transfers will be put forward by the Government later this year to ensure that variations in scheme rules don’t result in people failing to save.
Regulatory differences of pension schemes, including the use of short service refunds rules have been scrutinised in a Call for Evidence.
Short service refunds mean that people who leave their job in less than two years get a default refund of their pension contributions. People who move jobs often could find themselves out of pocket - defeating the purpose of having a workplace pension in the first place.
Responding to the evidence, Minister for Pensions, Steve Webb said:
Automatic enrolment at its core is about getting people to save for their retirement. With just over half of working people changing jobs within two years, the use of these refunds pose a significant threat to what we are doing.
Responses made clear the complexity of the issues, and that changes to short service refunds cannot be made without also considering how small pension pots and transfers should be treated after automatic enrolment.
Steve Webb added:
We will announce a full set of proposals in the Autumn, outlining proposed changes to short service refunds, together with potential ways to manage the burden of small pension pots after automatic enrolment.
In the meantime I would encourage employers not to make their decision about scheme type on the assumption that short service rules will continue to exist in their current form going forward.
Notes to Editors
- A Call for Evidence ran from 31 January 2011 - 18 April 2011. The response is available here: http://www.dwp.gov.uk/consultations/2011/personal-pensions.shtml
- The Pensions Bill, currently in the Commons and will implement measures in the Making Automatic Enrolment Work review to introduce Automatic Enrolment from 2012. The Pension Bill is available at www.dwp.gov.uk/policy/pensions-reform/