I am pleased to be able to publish today the Government’s initial response to the call for evidence on regulatory differences between occupational and workplace personal pension schemes.
Automatic enrolment into workplace pensions will change the pensions landscape dramatically. It is therefore essential that the regulatory landscape to deliver these changes remains appropriate.
The call for evidence provoked varied and wide-ranging responses and has helped to identify areas of attention to ensure the success of the workplace pension reforms. The most contentious issue is short-service refund rules and I remain convinced that these rules pose a risk to our goals of increasing pension savings. Responses to the call for evidence show, however, that there are no easy answers and that removing these rules will result in more small, stranded pension pots. So we believe that a decision on short-service refunds must take account of a solution for small pots across the whole pensions industry.
This solution will go to the heart of what the pensions landscape should look like after 2012 and we need to fully understand the potential impact of this on individuals, schemes and employers. We will therefore undertake further analysis which builds on the call for evidence, in order to publish a more detailed follow-up paper in the autumn. This paper will outline how we intend to change short-service refunds, together with potential ways to manage the burden of small pension pots after automatic enrolment.
I would emphasise that short-service refunds are unlikely to continue in their current form. As this area remains under review, I would encourage employers not to choose a new pension scheme on the assumption that the default refund of employer contributions will be available after automatic enrolment.
I would like to thank all those groups who have been engaged on this issue and responded to our call for evidence.
The Government response will be placed in the Library and will be made available later today on the Department’s website.