DWP publishes plans for pot-follows-member pension schemes

The Department for Work and Pensions (DWP) has published plans to make it simpler for employees to take their work pension scheme with them from job to job.

Current rules make it difficult for employees to combine their pension pots as they move jobs, leaving money stranded or lost completely.

The DWP has consulted on various approaches, including a suggested central aggregator. The pot-follows-member model will aim to give greater levels of consolidation and halve the potential number of dormant pots by 2050.

It could also provide the best reduction in administrative costs for pension providers in the long run, potentially offering further benefits for savers in the form of lower charges.

Steve Webb, minister for pensions, said: “We need a system where people build up worthwhile pension pots in one place, rather than having lots of small pots all over the place.†

“But, at the moment, every time someone moves to a new job there is a risk that they leave behind a small pension pot, which they lose track of. Our plans will mean that individuals get better value for their savings and bigger pensions as a result.

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“Automatic enrolment will help millions of people save into a pension, with a contribution from their employer. Our overall goal of getting millions more people saving would be completely undermined if people are let down by a set of rules that mean people lose track of money saved and miss out on vital income in retirement

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