Meeting future workplace pension challenges: improving transfers and dealing with small pension pots
This consultation looks at how Government and the pensions community can work together to solve a key challenge facing the workplace pensions system: the proliferation of small pension pots. We anticipate that automatic enrolment and a highly mobile jobs market will lead to around 4.7 million additional small pension pots in our future pension system. The burden of these small pots is compounded by the fact that systemic barriers, like cost and complexity, prevent people from moving and consolidating their pensions into the one place.
The paper suggests a number of ways to help people get the most out of their pension, and more easily transfer and keep track of their pension savings.
The proposed approaches range from:
- improving the current member-initiated framework, including encouraging members to consolidate their pension savings and reducing the cost of administering small pension pots;
- automatically transferring small pension pots to one or more aggregator schemes, so that all small pension pots are stored in one place; and
- automatically transferring pension savings so they follow an individual from job to job.
We welcome feedback and evidence from stakeholders about how these possible solutions might work in practice. We also want to hear from stakeholders about any other ways to improve transfers and reduce the number of small pension pots. Firm proposals for reform in this area will be published next year.
The paper also announces the abolition of short service refunds for DC occupational schemes. These rules jeopardise pension savings for low to median earners and have no continuing role in an automatic enrolment world. Abolishing the rules will retain £70-£130 million in pension saving. We aim to abolish these rules at the earliest legislative opportunity and expect the rule change to happen as soon as 2014, provided we are able to implement an accompanying solution for small pot transfers at the same time.
An impact assessment related to this change is published alongside this consultation paper.
We have also published a summary of DWP research on pension transfers which has been cited in the paper. This research is due to be published later in the year.
Who this consultation is aimed at
We want to hear from everyone who is interested in the improving transfers and member outcomes in relation to small pension pots. We particularly welcome contributions from:
- the pensions industry and its representatives
- pension administrators and trustees
- employers and there representative organisations
- members of the public.
The consultation
- Meeting future workplace pension challenges: improving transfers and dealing with small pension pots (795KB)
Rich Text Format
- Meeting future workplace pension challenges: improving transfers and dealing with small pension pots (3.9MB) RTF
Welsh summary
Impact Assessment
Summary of research findings
How to respond to this consultation
Start date 15 December 2011
End date 23 March 2012
Please send your responses, preferably by email to –
regulatory.differences@dwp.gsi.gov.uk
If you would like more information about this consultation please contact us using the details below.
Natalie Weddell
Department for Work and Pensions
7th Floor
Caxton House
Tothill Street
London
SW1H 9NA
More information
Our How we consult page has more information about the code of practice we follow and explains how we deal with responses.
