Pension automatic transfer scheme to launch autumn 2016

retirement pots

People with fragmented pension savings will have their multiple pension pots gathered together under proposed new rules from the government.

Pensions minister Steve Webb yesterday outlined plans in which small workplace pension pots will automatically follow their owners when they change employer.

Webb aims to make it easier for pension investors to keep track of all their holdings and avoid losing track of small pots over the course of a career in which they might change employers several times.

Your pension pot will automatically follow you if it is less than £10,000, was begun after July 2012, and invested in a charge-capped default arrangement when it is valued - the charge cap of 0.75% is another policy introduced by Webb.

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Pot follows member

Pots that are actively managed by their owners will be excluded from automatic transfer.

Plans for this 'pot follows member' or 'automated transfer' system complement the introduction of automatic enrolment - the scheme by which employees are automatically entered into an employer's pension scheme.

Webb says: "If we fail to take action there could be over 50 million dormant pension pots drifting away from savers by the middle of this century - that's billions of pounds floating around that should be funding better retirements for people.

"Auto enrolment is helping people save for retirement, but we must help them to keep their pots together so they know clearly that their pension is growing for their future.

"With the average person now having 11 jobs in their career, this further reform is essential."

'Pot follows member' is due to come into force in autumn 2016.

This article was written for our sister website Money Observer

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Your Comments

Let's hope that the Pension Tracing Service has improved.

My wife had a tiny pension from over 30 years ago, so last year as she approached 60, I tried to contact the insurance company (Company 1)that it was bought from. They were no longer in business. I found out who took over the pensions (Company 2), and tried to contact them. They were also no longer trading.

So she wrote a letter asking for help from the Tracing service. They came back and advised that Company 2 had the pension. She wrote back and advised them that they were not around any more, so they then said that she should contact Company 2 (again). Bizarre!

Anyway, after many hours searching I found the insurance company that now held the funds. As it was a trivial amount, they paid it out in full on her 60th birthday.

So their motto should be:
We tried to trace your pansion, but we didn't try very hard.