Pension automatic transfer scheme to launch autumn 2016
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.
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