Mastertrust woe at small pot transfer costs

The People’s Pension, the multi-employer scheme launched by B&CE, has estimated its administrative costs could double as a result of increased transfers in and out of the scheme, at least in the short term following the reform.

“It could be a lot worse than this depending on how the transfer system technology is funded,” said Jamie Fiveash, director of customer solutions. “We estimate that we will have to process at least 100,000 transfers a year.”

He added the government’s impact analysis did not take account of the greater amount of transfers that would be suffered by schemes such as The People’s Pension and Now Pensions, which expect to be dealing with companies with high levels of employee turnover.

“As it is now, it would be way too expensive,” said Morten Nilsson, the chief executive officer of Now Pensions. “With the current processes and the current systems, the cost would be prohibitive.”

A spokesperson for the Department for Work and Pensions said: “We recognise transfers can currently be costly, but believe there is significant scope to bring this cost down, particularly with automatic transfers.”

The initial cost will be outweighed in the medium-to-long term by not having to administer so many smaller savings pots, the spokesperson added.

Consultants have echoed concerns about the unintended consequences of the government's consolidation reform.

Paul Sturgess, head of DC at Capita Employee Benefits, said: "Operating costs are an issue that hasn’t been given enough attention throughout this debate.

"Many providers will not have the margin that enables them to simply absorb material additional costs."