Pensions minister Steve Webb calls for short-service refunds to be scrapped

Short-service refunds do not fit in with the government’s aim of getting more people to save for their retirement, according to pensions minister Steve Webb speaking at the annual LCP pensions conference. 

Short-service refunds allow employees that leave their job in less than two years to receive a default refund of their pension contributions.

Rob Thomas, an associate at pensions actuary Barnett Waddingham, said: “Removal of short-service refunds must lead to increased costs for trust-based pension schemes, because the employer portion of the refund is often recycled as pension contributions for another member.

“From an employer’s perspective, this also removes one of the advantages that trust-based schemes have over contract-based defined contribution (DC) plans such as group personal pension (GPP) plans and group stakeholder plans where such refunds are not permitted.”

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