“Pot for life” needs a change in employer mindset on workplace pensions

Tom’s discussion is well worth a watch , not least for the various interventions from an engaged audience.

The position he adopts is simple. He agrees that the existing stock of small pots should be combined through  “default consolidators” as proposed by the Government in one of the Mansion House Consultations.

He considers a “pot for life” solution could be implemented going forward. This would work for most people as most people have pots that deliver value for money.

The key dependency is payroll , which would either need to clear to the pot of choice. Payroll has proved itself sympathetic to the needs of savers but employers have not shown any appetite to pay for extra payroll functionality or service, to ensure the clearing worked.

This runs into a fundamental problem with auto-enrolment. Employer support has been on a “compliance-only” basis. Most employers do the bare minimum to choose a pension , assess contributions and pay money over to a chosen provider.

The numbers of employers considering a workplace pension an employee benefit is small relative to employers who simply comply. Issues such as salary sacrifice are typically only business justified if there is a shared benefit between employer and staff. Offering a service to staff which allowed money to paid into the pension of choice does not get a tick from most employers.

While there is clearly “something in it” for providers, who find small pots a growing problem, there has been a reluctance from them to build the APIs to payroll software to allow a pot for life system to work. Practitioners such as System Sync, speaking at the event, explained that without mandation, it was hard to see progress on the scale needed to put an end to the small pot problem.

With advocates such as Tom McPhail, it is unlikely that the “pot follows member” initiative will go away, but the Pension PlayPen coffee morning showed that there is currently insufficient will among any of the stakeholders to make this happen.

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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1 Response to “Pot for life” needs a change in employer mindset on workplace pensions

  1. Derek Benstead says:

    When a new recruit joins an employer, they provide bank details for the payment of their salary. Providing bank details for the payment of a pension contribution could be just as natural. Getting many employers to set up DC accounts (I won’t call them pensions) for the first time got auto-enrolment off the ground. The natural next step is for people to have their own DC account which they notify to each new employer so all their retirement savings go into the one account. No point discussing the small pot problem if you don’t also address the origin of the proliferation of small pots.

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