The National Association of Pension Funds (NAPF) commented on Government proposals announced today that an employee’s pension pot will be transferred automatically when they move jobs.
Joanne Segars, NAPF Chief Executive, said:
“We all agree that the increasing number of small pots is a problem that needs tackling, especially with auto-enrolment around the corner.
“Small pots mean that people could get worse retirement outcomes, with higher charges eroding the value of people’s hard-earned pension saving.
“While the Government’s idea is one way to solve the problem of small pots, it does not tackle the risk that people might see their pension transferred to a worse scheme with higher charges and weaker governance. There is a real risk of a pensions lottery where people could be automatically transferred into better or worse schemes without them being aware of the impact. It will be interesting to see how the DWP’s plans will ensure better outcomes for members.
“We believe a better solution would be to allow people to transfer their pensions into large-scale, low-cost aggregators which are simpler and better placed to deliver good member outcomes. We urge the Government to reconsider its preference for 'pot follows member'.”
The NAPF calculated that if someone with a pension pot of around £10,000 and an annual management charge of 0.5% was then moved into a pension with an AMC of 0.9% a year, then they would lose around £1,500 or 10% of their pot after 25 years.
Notes to editors:
1. The NAPF is the leading voice of workplace pensions in the UK. We speak for 1,200 pension schemes with some 15 million members and assets of around £800 billion. NAPF members also include over 400 businesses providing essential services to the pensions sector.
Paul Platt, Head of Media and PR, NAPF, 020 7601 1717 or 07917 506 683, [email protected]
Christian Zarro, Press Officer, NAPF, 020 7601 1718 or 07825 171 446, [email protected]