Automatic transfers consolidating pension savings
Last week, the Department for Work and Pensions (DWP) issued the snappily-titled paper “Automatic Transfers: Consolidating Pension Savings”.The idea behind this is to avoid the build-up of small, poor value pension “pots” which was always likely as a by-product of automatic enrolment into pension saving.Small pots limit retirement income choices and value, and are easily lost and forgotten.TISA has been active in helping the industry work towards solutions to this problem.
Whilst I very much hope the industry will do this communally rather than waiting for the DWP to do it for them (and I will be doing everything I can to help them do this), we must be very concerned about the back-stop of a DWP build.
This is not to denigrate the Department, but the history of large-scale public sector IT builds is one of almost unmitigated disaster, with a few shining exceptions.
If this is the preferred direction, experience tells me that we need to build a solution that is designed by, and for, the industry.
Automatic enrolment will see millions of people saving into a private pension for the first time and will make pension saving the norm.
However, without further reform, automatic enrolment will create up to 50 million dormant pension pots by 2050.
Automatic transfers will help to consolidate pension savings into an individual’s current employer’s scheme.