Pensions minister Steve Webb has confirmed changes to the government’s plans for automatic transfer reforms for its pot follows member project, which will see it initially rolled out on an opt-in basis.
This is a short-term rethink of the government’s original long-term plan that relevant pension pots will be automatically transferred unless an individual exercises their right to opt out.
Under the reforms, any workplace pension pot of £10,000 or less would automatically move when a person changes job.
Initial roll-out will be carried out in conjunction with 20 of the UK’s largest pension providers.
The measure is aimed at making it easier to ensure that all participating pensions can deal with the administrative requirements of auto-transfers and to get the system up and running.
The majority of the market will be covered by the reforms within 18 months of its launch.
Speaking to the Department for Work and Pensions (DWP) Select Committee, Webb said: “We want to get this up and running. We think the best way to do this is to start with the biggest providers, covering 90% of the market. They will get the infrastructure up and running.
“We will do it on an opt-in rather than an opt-out basis. Eventually money will follow you by default, but to get the thing going, because there are issues about pension liberation and matching pots that are slowing us down, we will do it on an opt-in basis.”
Tom McPhail, head of pensions research at Hargreaves Lansdown, added: “The potential benefits from this project are very substantial, so the DWP should be applauded for taking pragmatic decisions to make sure it works.
“Not only could it deliver billions of pounds in administrative cost savings, it could also help to combat pension fraud. It will make sense to exclude pension savers who are actively interested in their retirement savings but for the disengaged savers, auto-transfers will be a vital development.”
The DWP will publish more detailed plans in February 2015.