Automatic transfers consolidating pension savings

There are challenges but there are potential solutions too.

Outside of the pensions world, ways and means exist of achieving low cost 'money' transfers that could potentially be used here.

It will be up to pension providers to deliver this policy, rather than employers.

We believe the DWPs decision will ensure automated transfers of members savings (pot-follows-member) will have the benefit of operating under a single open standard, and we welcome this.

The UK government is to draw up new rules to enable a worker's defined contribution (DC) pension savings to be automatically transferred (47-page / 223KB PDF) into their new employer's DC pension scheme when they change jobs.

The automatic transfers, or 'pot follows member', regime will only apply to pensions pots that were first contributed to on or after July 2012, where their value is no more than £10,000 and where the pot is "invested in a charge-capped default arrangement at the point of valuation", the Department for Work and Pensions (DWP) said.

From April, members of DC pension schemes will have more freedom to access their pension savings in any way that they wish from the age of 55, without facing heavy tax penalties or necessarily having to purchase an annuity.

This new freedom will be backed by a right to guaranteed free and impartial guidance at the point of retirement.