With the advent of auto-enrolment, Aviva has come out in support of the “pot follows member” approach to pension transfers, arguing that automatic transfers between schemes will make it easier for employees to manage their pension in one place, see the total value of their savings, and prevent money being lost or forgotten.
The insurer is calling on the industry to back the Government’s proposals for “pot follows member” and agree a set of industry standards, with recommendations as follows:
Allow automatic transfers between small auto-enrolled pension pots to enable members’ retirement savings to “follow members” when they change jobs.
Implement agreed industry standards or a code to manage the automatic transfer process between auto-enrolment schemes.
Avoid a single aggregator approach – the lack of competition and diversity will be a significant risk for individuals and the UK economy.
Aviva’s preferred model for auto-enrolment schemes is a central clearing house to match the old scheme with the employee’s new scheme.
Limit automatic transfers to between automatic enrolment schemes only as they will meet minimum suitability standards and ensure adequate protection and broadly equal suitability for the consumer.
Legislate, and apply it retrospectively, to allow for automatic transfers from the start of auto-enrolment (October 2012) to smooth the way for simplifying the overall process for transferring non-auto-enrolment pension pots in the future.
According to the insurer, employees’ retirement savings could also be further protected by a “traffic light” code to help manage the automatic transfer process.
A simple set of rules would ensure that pension pots cannot automatically transfer if there is a possibility of significant detriment, and a traffic light approach would flag up such schemes.
Aviva UK and Ireland Life chief executive, David Barral, comments: “The industry should work together to agree common standards to avoid employees losing valuable benefits from previous schemes … there is no doubt in our minds that ‘pot follows member’ has clear advantages for the vast majority of the British workforce.”