ViaNova seminar: finding the right solution for
“Pot Follows Member”
ViaNova Seminar
2 October
Operation “Big Fat Pot” – why do we need it?
– Employers choose their workplace pension scheme for automatic enrolment
– 6 to 9 million individuals newly saving, or saving more
– But as people move jobs on average 11 times during working life, we calculate there
will be up to 50 million dormant pots by 2050
Chart 1: Number of dormant pension pots
‘Small’ pension pots:
– Inefficient for individuals
• also risk of lost pots
– Unprofitable for providers
60m
50m
40m
30m
20m
48
46
44
42
40
38
36
34
32
30
28
26
24
22
20
16
14
50
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
12
Automatic Transfers will:
m
– Minimise numbers of lost/stranded pots
– Deliver £6.4bn in savings to the industry by 2050
18
10m
Pot Follows Member – what’s in the Pensions Bill
Pension Bill clause and schedule
1) establish the principle of PFM
2) provide regulatory-making powers to determine:
–
–
–
–
What is an eligible pot
How transfers are valued
Who is responsible for identifying and moving eligible pots
Information to be provided to the individual – and the individual’s right to opt-out
–
–
–
An appropriate compliance regime
Quality standards for receiving schemes
Possible mechanism for pot matching
Pension bill – some details
–
–
•
Broadly speaking PFM will apply to money purchase schemes only though we can extend or narrow this scope eg to exclude schemes with guarantees
We will set a pot size limit of £10,000 in regulations - there is scope for this to be reviewed at least every 5 years
–
The system will be managed by pension schemes not employers. There is provision for a series of duties to be
placed upon schemes to ensure they transfer dormant pots. The duties will apply where the individual is in a
workplace pension scheme under Automatic Enrolment.
–
The system will ensure individuals receive information on how automatic transfers will impact them – which will
help them decide whether to allow the transfer or opt out
–
There will be a light-touch, proportionate compliance regime to be managed by tPR
–
There is power for some minimum essential quality standards to be applied to schemes. This includes the
power to limit or ban particular types of charge.
–
A statutory discharge from any further liability to provide benefits if the ‘ceding scheme’ takes the steps
prescribed in regulations correctly.
The legislation is flexible allowing us to define the detail later. The Bill does not describe how we will implement the
system and we have not committed yet to a specific model or timetable.
How can we make PFM work?
•
Conceptually – leaving aside the opt-out process – there are 2 components: pot
matching and transfer. (A consumer interrogation function could be added in but
isn’t essential.)
Consumer enquiry facility
Provider 2
Pot 1
Provider1
Employer 1
Data matching “wltm”
Physical transfer
Individual receives info regarding opt-out from
provider 2.
Employer 2
Pot 2
How can we make PFM work?
•
PTID means no central pot-matching; but a secure messaging system might also
mean no need for a central database
Could secure messaging instead of PTID
allow a “locate/search” exchange of
information between providers?
Pot 1
Provider1
Pot 2
Physical transfer
Employer 1
Provider 2
Employer 2
PTID
PTID includes summary data of existing pot, and
goes via employer to individual and then to the
new employer/new scheme
Provider 2 initiates transfer if
individual doesn’t opt out
PFM – issues and the challenge for you
– The challenges have a familiar ring
• Accuracy…. Security….. Minimising friction and cost
– However we implement PFM, the solution must work cross-industry
– We need your engagement – so please talk to us
https://www.gov.uk/government/publications/automatic-transfers-consolidating-pension-savings