Later today I intend to publish an update paper entitled “Automatic transfers: A framework for consolidating pension savings”.
This paper sets out the progress we have made in designing a model for automatically transferring a worker’s small pension pots when they change employment.
Automatic enrolment is helping people to save for retirement, but we must help them to keep track of their pension savings. We do not want members to end up with more dormant pots, but we expect 50 million dormant pots by 2050 if nothing is done.
This is the rationale behind the system of automatic transfer of small pension pots into the new employer’s scheme when a member changes employment, which was outlined in the Pensions Act 2014. To ensure this system is workable for both industry and members, we need a practical implementation model.
The update paper is the culmination of work that has taken place since the Act with a wide section of the pensions industry to analyse different options and create a safe and efficient model that works in the interest of workers saving for their future.
As outlined in the paper, it is my aim that automatic transfers will first apply to a limited number of schemes, but will still cover the vast majority of members. This first stage will introduce automatic matching of an individual’s small pots. The individual will then be contacted to confirm if they want these pots to be moved to their new scheme.
With minimal change the system will then transition to the opt-out model. The transfer of dormant pensions will then take place unless the member decides not to make the transfer.
I want to introduce the automatic transfer of pots as soon as possible, while also giving sufficient time for the industry to develop the new systems required. My goal is for the initial phase of automatic pot-matching to be in place by autumn 2016.
The document will be available at: http://www.gov.uk