MSE News: Changing job? Your pension should follow you, Government says

Former_MSE_Darryl

"New plans should make it easier for people to take pensions with them when they take up new jobs..."

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Changing job? Your pension should follow you, Government says



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dunstonh

So, in other words, no difference to what already exists with most defined contribution schemes.

Edwardia

My husband worked on tools for small companies for quite a few years and every time he would switch jobs they would refuse to pay into his existing personal pension and want him to use a different company. We figure they got commission from the pension company.

Eventually in OH's second management job he got the chance to consolidate most of them in his first year in the job and buy extra years but he still has a couple of personal pensions with not much in them.

So if he could move those to his pension that would add more years and be useful.

The question is would you be able to do it if you moved jobs within the same organisation ?

Reaper

This would only be of benefit if employers were obliged to pay into your existing scheme instead of forcing you to keep setting up new ones. Sadly it doesn't sound like what they are planning.

GhIFA

Reaper wrote: »

This would only be of benefit if employers were obliged to pay into your existing scheme instead of forcing you to keep setting up new ones. Sadly it doesn't sound like what they are planning.

Because forcing employers to do that would cost the business money and be impractical.

gadgetmind

Edwardia wrote: »

he still has a couple of personal pensions with not much in them.

This isn't such a bad thing given the new Stranded Pots regulations.

So if he could move those to his pension that would add more years and be useful.

Add more years?

GhIFA

Edwardia wrote: »

My husband worked on tools for small companies for quite a few years and every time he would switch jobs they would refuse to pay into his existing personal pension and want him to use a different company. We figure they got commission from the pension company.

Eventually in OH's second management job he got the chance to consolidate most of them in his first year in the job and buy extra years but he still has a couple of personal pensions with not much in them.

So if he could move those to his pension that would add more years and be useful.

The question is would you be able to do it if you moved jobs within the same organisation ?

It only applies to Money Purchase schemes - I would imagine this will in regard of both the transfers out and transfers in.

Reaper

GhIFA wrote: »

Because forcing employers to do that would cost the business money and be impractical.

Why? All they need is a sort code and account number. If they can pay wages into different bank accounts what's so hard about doing the same with pension payments (at least for Money Purchase schemes)?

GhIFA

dunstonh wrote: »

So, in other words, no difference to what already exists with most defined contribution schemes.

It would seem so. But the suggestion is that it will be an "opt-out" arrangement so increases the chances of unsuspecting employees finding that they have transferred into a worse scheme than the one they were in.

GhIFA

Reaper wrote: »

Why? All they need is a sort code and account number. If they can pay wages into different bank accounts what's so hard about doing the same with pension payments (at least for Money Purchase schemes)?

Because, invariably, the receiving provider will collect by Direct Debit (as most do once an employee's plan is converted to an individual one on leaving the sponsoring employer) - that's a lot of new individual payments (hundreds, potentially thousands for a large company).

Where the previous scheme is an occupational money purchase arrangement it may not even be possible to receive payments for staff that have left.

That's a lot more administration for a payroll function that will add cost to the business.

You'll get better terms through a group arrangement.

jamesd

This seems useful as an opt in method, more so if NEST is required by law or regulation to comply instead of attempting to continue with its policy of locking people in to its product once they have paid money in.

Mandating the ability to transfer out of work schemes while continuing to be a member would also be useful, since limited investment choices and sometimes higher costs than are available in the open market are issues.

Group pensions can have better terms than individual pensions but on costs, employers do somehow manage to make payroll payments into one bank account per employee, or more, so it's certainly not impossible or fundamentally cost-prohibitive to have the same capability for pensions. More something that is traditionally not done that is likely to be detrimental to employees in smaller schemes.

Group pensions tend to have more limited investment choices and that's not necessarily a good thing. For smaller schemes it's entirely possible that a well selected personal plan can be better for the individual.

Big group schemes can offer better terms than individual schemes but even using a provider that is regarded as high cost (HL) I have a cost of holdings that it not higher than the large group pension plan at work. That's because I use some lower cost options that are not available to me at comparably low cost in the work scheme, as well as exploiting the broader range of investment choices.