Pension 'pot for life' predicted for Autumn Statement

Pensions could become more like a bank account into which different employers have to pay, under a shake-up expected in the Autumn Statement. A report in today's Financial Times suggests workers may be allowed to nominate the pension scheme they want their employer to pay into. The paper predicted that the new measures would be detailed in a call for evidence which would be announced in tomorrow's Autumn Statement. Advocates of ‘pot for life’ reforms argue allowing employees to choose their own auto-enrolment scheme would help solve the £27bn lost pension pots problem. However, questions remain over the cost of implementing the proposals, which would potentially require businesses to link up with dozens of different providers. Pensions Dashboards remain the most obvious solution to connect savers to their pension pots and ultimately enable more people to consolidate, said Tom Selby, head of retirement policy at AJ Bell. Mr Selby said: “Some sort of clearing house would be needed to channel member contributions to multiple schemes, with slick processes so firms are able to easily connect. That won’t come cheap, so the next obvious question is how much could that project cost and who will pay for it?” He said with unanswered questions hanging in the air, a call for evidence to scope out the pros and cons “feels like a sensible approach.” Given the proximity of the general election and Labour’s substantial lead in the polls, there is every chance Keir Starmer’s party will have the final say on whether these reforms ever see the light of day, he pointed out. Becky O’Connor, director of public affairs at PensionBee, said: “Pot for life has the potential to shake up the industry, bringing what consumers actually care about to the forefront, boosting competition and bringing the way people engage with pensions into the 21st century.” But former pensions minister Sir Steve Webb, partner at consultants LCP, raised concerns that employers’ ability to “bulk buy” could be lost. He said: “Workplace pensions are currently a wholesale business where employers negotiate a good value deal for their entire workforce. As a result, the average workplace pension charge is currently below 0.5%. If the system was fragmented, this bulk buying power of employers would be lost.” He warned that top earners would be bombarded with marketing as pension providers cherry-picked the most profitable business. He said the net result would be that the remaining workers would no longer have access to such a good workplace pension. Mark Futcher, partner at consultancy Barnett Waddingham, said: “A sudden shift to a ‘pot for life’ risks people choosing a sub-optimal pension plan, being swayed by marketing over value, and ultimately exacerbating the UK’s retirement crisis.”

Pension 'pot for life' predicted for Autumn Statement

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