New calls for “pot follows member” pension reform to be scrapped
Not long after the government announced plans to introduce a “pot follows member” scheme for automatic enrolment pensions, there have been calls to scrap the plan and replace it with a central clearing house to consolidate savings.
The idea of the “pot follows member” reform was that when workers left one company to join another, their pension pot would automatically move with them. This would mean that people could build up one single pension pot, rather than numerous different ones, as it is now much less common for people to have one career for their entire life then it was when pensions were first introduced.
Auto enrolment means that all eligible jobholders must be automatically enrolled onto a qualifying pension scheme, after meeting certain criteria. This will lead to many more people saving in workplace pension schemes, so simplifying the process is a good way to keep employees involved.
The prospect of a central clearing house to consolidate savings was proposed by Michael Johnson, research fellow at the Centre for Policy Studies. In a paper published by Johnson he suggests giving employees a default aggregator when they move jobs, while still giving them the option to take their money to the new employer’s scheme or a different aggregator. Johnson also suggested the government’s proposed limit of £10,000 on automatic transfers should be removed.
Do you think the “pot follows member” scheme would work? Or do you think an aggregator scheme would be more efficient?
To help you prepare for auto enrolment, we are holding three hour seminars across the country and online. To find out more information or to book your place, please call a member of our team on the numbers below.
IRIS Payroll software users - 0344 815 5656
IRIS GP Payroll software users - 0344 815 5660