Presentation on theme: "ViaNova Seminar 2 October ViaNova seminar: finding the right solution for “Pot Follows Member”"— Presentation transcript:
ViaNova Seminar 2 October ViaNova seminar: finding the right solution for “Pot Follows Member”
Operation “Big Fat Pot” – why do we need it? –Employers choose their workplace pension scheme for automatic enrolment –6 to 9 million individuals newly saving, or saving more –But as people move jobs on average 11 times during working life, we calculate there will be up to 50 million dormant pots by 2050 ‘Small’ pension pots: –Inefficient for individuals also risk of lost pots –Unprofitable for providers Automatic Transfers will: –Minimise numbers of lost/stranded pots –Deliver £6.4bn in savings to the industry by 2050 Chart 1: Number of dormant pension pots
Pot Follows Member – what’s in the Pensions Bill Pension Bill clause and schedule 1)establish the principle of PFM 2)provide regulatory-making powers to determine: –What is an eligible pot –How transfers are valued –Who is responsible for identifying and moving eligible pots –Information to be provided to the individual – and the individual’s right to opt-out –An appropriate compliance regime –Quality standards for receiving schemes –Possible mechanism for pot matching
Pension bill – some details –Broadly speaking PFM will apply to money purchase schemes only though we can extend or narrow this scope - eg to exclude schemes with guarantees –We will set a pot size limit of £10,000 in regulations - there is scope for this to be reviewed at least every 5 years –The system will be managed by pension schemes not employers. There is provision for a series of duties to be placed upon schemes to ensure they transfer dormant pots. The duties will apply where the individual is in a workplace pension scheme under Automatic Enrolment. –The system will ensure individuals receive information on how automatic transfers will impact them – which will help them decide whether to allow the transfer or opt out –There will be a light-touch, proportionate compliance regime to be managed by tPR –There is power for some minimum essential quality standards to be applied to schemes. This includes the power to limit or ban particular types of charge. –A statutory discharge from any further liability to provide benefits if the ‘ceding scheme’ takes the steps prescribed in regulations correctly. The legislation is flexible allowing us to define the detail later. The Bill does not describe how we will implement the system and we have not committed yet to a specific model or timetable.
Conceptually – leaving aside the opt-out process – there are 2 components: pot matching and transfer. (A consumer interrogation function could be added in but isn’t essential.) Physical transfer Data matching “wltm” Pot 1 Pot 2 Provider 2 Provider1 Employer 2Employer 1 Consumer enquiry facility Individual receives info regarding opt-out from provider 2. How can we make PFM work?
PTID means no central pot-matching; but a secure messaging system might also mean no need for a central database Physical transfer Pot 1 Pot 2 Provider 2Provider1 Employer 2Employer 1 Provider 2 initiates transfer if individual doesn’t opt out PTID includes summary data of existing pot, and goes via employer to individual and then to the new employer/new scheme PTID Could secure messaging instead of PTID allow a “locate/search” exchange of information between providers?
PFM – issues and the challenge for you –The challenges have a familiar ring Accuracy…. Security….. Minimising friction and cost –However we implement PFM, the solution must work cross-industry –We need your engagement – so please talk to us https://www.gov.uk/government/publications/automatic-transfers-consolidating-pension-savings