MSE News: Savers to be able to take pensions to new jobs

Former_MSE_Helen

"The Government has announced plans to make it easier for people to take their work pension with them from job to job..."

Read the full story:
Savers to be able to take pensions to new jobs

Reaper

A good idea in principle but:

1) How will this work for people lucky enough to be on a Final Salary scheme? The last thing they would want to do is to have it converted to a Money Purchase scheme when they leave.
2) There is a danger of moving money out of a good scheme with low annual charges into one with higher charges unless the transfer is optional or charges are standardised.

dunstonh

To be honest, I struggle to see what is wrong with the current system. Since the Options transfer system came in, providers can transfer money between them in a matter of a week.

Defined benefit schemes will have issues and should have issues as transferring them would be wrong in the majority of cases.

The only things it needs for the current system to run smoother is to get those companies not using Options to use it and maybe get the discharge form standardised in some way.

jamesd

The DWP consultation which is behind this news story can be found at Meeting future workplace pension challenges: improving transfers and dealing with small pension pots and here is the response itself (PDF).

The key themes part of the document on page 42 says:

• "On balance, we consider that a system of automatic transfers to the new emplofavoured approach.
• We recognise the concerns about implementation, so we want to develop a model of automatic transfers that includes pots created in automatic enrolment schemes only.
• We agree that defined benefit and legacy pots should be out of scope at this stage that there should be opt-out, and that the automatic transfer process for small pots should be unadvised business.
• We agree that there is a need to look at issues of consumer detriment and how the system might work where people have multiple jobs or gaps in employment.
• We would like to achieve change as soon as practicable and want to work further with all interested parties to develop proposals and understand how they might be implemented and funded.
• We will also work with industry to explore the potential of a virtual pot solution, particularly to help those with larger pots to see all their savings in one place.
• We will work alongside the pensions industry’s new working group which will be looking at the scope to make more immediate improvements to the current voluntary transfer framework.
• We will abolish short-service refunds at the earliest legislative opportunity, but would like to explore with the pensions industry and employer representatives the idea of allowing micro-pot refunds in an automatic transfer solution."

gadgetmind

dunstonh wrote: »

To be honest, I struggle to see what is wrong with the current system.

Other than the speed issue that you've flagged, I tend to agree. Moving pots isn't difficult even for those who DIY and that some folk lose track of pension pots just shows that different people have different attitudes to money.

gadgetmind

jamesd wrote: »

to help those with larger pots to see all their savings in one place.

I have this already and it's called a spreadsheet!

jamesd

It'd still be convenient to have a virtual view of pots in multiple schemes, each of which is most efficient for a particular investment, and with an easy way for a consumer to move money between schemes, without mandated IFA involvement so that the individual is truly in control of their money and involved with it. The government response to this concept on page 16 was "We would like to work with industry to explore the potential of a virtual tool further, particularly to help those with larger pots to see all their savings in one place. The virtual tool might enable those with a range of larger pension pots to engage with these. However we would see any virtual tool being additional to an automatic transfer solution for small pots".

dunstonh

Makes you wonder how people survived in the past. I suppose the more you dumb down, the less responsibility people have to take and the less responsibility they have to take means you have to keep dumbing down.

anniecave

One major problem is that most people paying into pensions don't have a good (or even a basic!) understanding of how they work, what charges they pay, how to compare between different providers

A lot of people don't understand the difference between different types (eg defined benefit, final salary, the differences betweeen a company scheme, or the company paying into a personal scheme etc etc)

I work in accounts and have a fairly good basic knowledge of most financial things, but even I don't understand much to do with pensions...