Webb wants default small pot transfers

Steve Webb has announced a consultation on the subject of numerous small pots accumulated predominately by transient low-paid workers will be launched in December.

He has already publicly discussed changing the law to make workplace pensions automatically transfer from one scheme to another, as and when the saver changes employment, or making the National Employment Savings Trust (Nest) the default repository for such pots.

But PW understands the minister is privately determined to take the first option, as the best way towards banning enhanced transfer value exercises, and the forthcoming Green Paper will reflect this.

The move will mirror the Department for Work & Pensions’ (DWP) approach to state pension reform, where two alternatives have been included in the consultation, but the government has strongly stated its preference for a £140 a week single-tier offering.

Webb told a congregation of trade unionists last week: "The risk with small pots is that you'll lose them so we need to find ways to bring them together.

"We've considered two options, the first one being that the pot will follow you to your next employer. The second option is they'd be transferred to a third-party provider such as Nest.

"We've also called for feedback on short-term service refunds and we'll put an announcement out next month on abolishing it. It's against the spirit of pensions."

Meanwhile, the department has also confirmed it will spend more than its stated £10m budget for promoting auto-enrolment.

Speaking to Saga director general Ros Altmann last week, Webb said part of the drive to raise awareness around the policy would involve handing cash to external organisations including the Pensions Advisory Service (TPAS).

He said: “We want to maximise the bang for the buck… So we have worked with pension providers and others. We will be resourcing, for example, TPAS, which is an independent free of charge service… so that people can ring up.

“They won’t be able to give personalised, tailored financial advice, but they will be able to answer a lot of questions. We need to get the information out there so people know what’s happening.”

A DWP spokesman confirmed to PW: “We are currently working with TPAS to plan their approach to supporting automatic enrolment and assess any extra resourcing required.

“The amount has not been agreed yet, however it will be in addition to the communications budget.

“At the moment we have no plans to resource other third parties, although we are working in partnership with a wide variety of organisations.”