A new system to stop workers losing small pension pots as they move from job to job is set to be launched next year.
Under the initiative, due to take effect from autumn 2016, workers will initially be offered the option of consolidating their pension pots, before an automatic system is rolled out.
Pensions Minister Steve Webb said on 11 February: “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.”
Mr Webb was speaking to coincide with the publication of an update paper on automatic pension transfers, produced after nine months of work with the pensions industry to analyse different options for a safe and efficient ‘pot follows member’ model.
The aim is to have an automatic pot-matching system in place by autumn 2016. Workers will be contacted to confirm if they want their mini pots accumulated from previous jobs to be consolidated into their new scheme, with an initial opt-in system introduced ahead of a full opt-out model.
Under the plans, automatic transfers will first apply to a limited number of larger schemes, covering the vast majority of pension scheme members in the country.