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Smaller pension pots should be automatically consolidated to facilitate tracking and encourage retirement savings, the pensions minister said.
A proposal presented by Laura Trott suggests that by automatically consolidating small pensioners, workers can avoid inadvertently losing money or paying unnecessary fees. increase.
The Ministry of Labor and Pensions said such reforms would give pension savers more clarity about which schemes offer good value for money.
Having a variety of small annuity pots increases the risk of going off track or losing money financially through management costs and inefficiencies.
This has become a bigger problem since the introduction of auto-registration in 2012.
Pension inequality with different post-retirement incomes has also increased since the decline in defined benefit (DB), which provides annual set benefits to post-retirement savers, and the advent of defined contribution (DC) schemes. I’m here. How much have you contributed over time?
A call for evidence, which runs through March, will examine the potential scope for automatic consolidation of some pensions.
One of the proposals includes a default consolidator where small pots are automatically transferred to one scheme.
Another policy under consideration is “Pot Followers”. This means that when an employee changes jobs, the pension pot will follow and automatically move them to the new employer’s plan.
DWP is also consulting on the new Value for Money (VFM) framework developed in collaboration with pension regulators and the Financial Conduct Authority.
This will set guidance on how the scheme is expected to provide depositors with better value from their investments and a level of quality of service.
The government said it would improve competition and require pension schemes to disclose key metrics and service standards.
It also makes it easier to compare and contrast the performance and cost-effectiveness of different annuity providers.
Sir Steve Webb, former Liberal Democrat Pensions Minister and now partner at consultants Lane Clark & Peacock, said: The Pensions Act 2014 provided a pot follow member solution.
“Unfortunately, this has been overlooked and, nearly a decade later, it is still in the ‘request for evidence’ stage with further consultations going on. ”
Mr Trott said:
“Someone could lose thousands of pounds by being in a poorly performing pension scheme.
“The Value for Money Framework and our new measures will improve security and give savers a better return so they can enjoy their hard-earned retirement.”