A new system to stop workers losing pension savings when they transfer jobs was outlined today by the Minister for Pensions Steve Webb.
Due to be implemented in autumn 2016, the new system of pensions transfers will mean that small pension pots that a worker may have accumulated from different jobs will be able to be consolidated within their current employer’s pension scheme.
Steve Webb said:
“If we fail to take action there could be over 50 million dormant pension pots drifting away from savers by the middle of this century – that’s billions of pounds floating around that should be funding better retirements for people.
“Auto enrolment is helping people to save for retirement, but we must help them to keep their pots together so they know clearly that their pension is growing for their future. With the average person now having 11 jobs in their career, this further reform is essential.
“I want to introduce ‘pot follows member’ as soon as possible so we don’t lose the momentum that automatic enrolment has delivered in turning around pension saving in Britain.”
The first stage in automatic pension transfers is to automatically match workers’ mini pension pots. People will initially be offered the option of consolidating their pension pots before an automatic opt-out system is put into place.
Automatic enrolment into workplace pension schemes is already in place for over five million UK workers, which will increase as more companies reach their staging date for auto-enrolment in the next three years.