Pensions minister Steve Webb has conceded that the government’s proposals to solve employees building up multiple small pension pots, could result in consumers ending up in worse schemes than they were in before.
Speaking at the Tax Incentivised Savings Association (Tisa) annual conference, Webb acknowledged that the government’s proposed ‘pots follows member’ plan meant someone could be transferred from a good pension to a bad one.
He said some employees would not be aware of the difference in quality between schemes, and that the situation could be resolved by there being a reduction in bad schemes in the market, something he argued would happen through the introduction of auto-enrolment.
‘The challenge for us is “how do we make sure that millions of people go into better quality schemes?”' he said.
'What happens when people go down market? What happens to people that don't use the National Employment Savings Trust and they aren’t being fought over by the industry because they don't have the scale? I want to have a conversation with the industry on what look good looks like.'
He said that there were a 'hell of a lot' of small scale pensions scheme that were not cost effective but that through auto-enrolment the industry would see consolidation to bigger and fewer pension schemes.