Chancellor Hunt to unveil 'pot for life' pension reforms

investmentweek.co.uk:

The reform comes as the government has been looking for a way to consolidate schemes and solve the challenge of small pots.

The measures — reported by the Financial Times  and expected to be included in tomorrow's Autumn Statement — will be similar to the approach taken by countries such as Australia.

The FT quoted a HM Treasury insider as saying: «Helping people keep the same pension pot will stop billions of pounds being needlessly lost and make sure tomorrow's pensioners benefit from every penny they save.»

At present, employers are obliged to automatically enrol eligible new staff into a retirement scheme chosen by the company — a requirement that has resulted in millions of small pots building up in the system as workers move jobs and switch to a new employer's scheme.

This comes after the government issued a call for evidence on addressing the challenge of deferred small pots in July — focussing on two large-scale automated consolidation solutions — a default consolidator model and pot follows member.

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At the time, the Department for Work and Pensions said it wanted to deepen the evidence base around the scale and characteristics of the growth in the number of deferred small pots.

Introducing the call for evidence, the then pensions minister Laura Trott said: «The growth of small pots means there is undue cost and inefficiency in the pension system.

»It creates a risk that deferred members lose track of their workplace pension savings — acting as a disincentive to member engagement. And it creates a cross subsidy risk for members with larger pots, which may impact their retirement outcomes."

Trott added: «We will assess the evidence to identify and develop an approach