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Webb: small pots reform could put employees in worse schemes

by Michelle Abrego on Nov 14, 2012 at 15:38

Webb: small pots reform could put employees in worse schemes

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.

10 comments so far. Why not have your say?

Roydo

Nov 14, 2012 at 16:14

"I want to have a conversation with the industry on what good looks like"

Lord save us. It would all look an awful lot better without the meddling of endless idiots.

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DS

Nov 14, 2012 at 16:21

Personally I think this 'pot follows member' idea is quite a bad one. Not all companies will go with the same provider, and even if they did, the provider won't offer the same terms for every scheme. One scheme adviser might have set the scheme up pre R-day on a commission basis, the next scheme has been setup on a consultancy charge at £500 initial and 0.5% ongoing... Too many variables to make a one size fits all approach like this work.

I suppose arguably with small pots it won't matter, but it would make a much bigger difference the biggier the pot is.

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Stuart Rathbone

Nov 14, 2012 at 16:27

Ha-ha

“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”.

They could always do what we all have to do when we are in a position where we have no knowledge or experience. Engage a professional and PAY THEM for their advice. Never catch on if you ask me.

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Barry Fleet

Nov 14, 2012 at 16:30

Re Roydo's comment, i don't think pointless sarcasm helps much.

Considering that Webb is the first Pensions Minister for 20 years who has any actual interet in pensions, and actually wanted the job, I suggest that we should be grateful that we have someone who wants to engage with the pensions industry.

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Roydo

Nov 14, 2012 at 16:36

@ Barry. Agree, Webb has been the most engaging minister for a long, long time. My remark was more aimed at the "middle manager" babble of seeing what "good" looks like.

Dont think I was being sarcastic, but, if so, sorry!

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Roydo

Nov 14, 2012 at 16:36

@ Barry. Agree, Webb has been the most engaging minister for a long, long time. My remark was more aimed at the "middle manager" babble of seeing what "good" looks like.

Dont think I was being sarcastic, but, if so, sorry!

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The Insider

Nov 14, 2012 at 16:44

What about a radical idea, the government takes a small amount of money from all the people that work each time they get paid. they could call it national insurance or something like that, then earmark the money in a special account in the bank of England, maybe lend that to people to buy houses or lend to other banks and they pay a rate or return and the profits get distributed to everyone once they Stop working.

Oh hang on did we not have that and some bright spark paid it all out to the ones that don’t work?

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Keith Cobby

Nov 14, 2012 at 16:56

Another week, another article on the 'small pot problem' to tempt us to comment on!

This problem only occurs because of the poor way in which this scheme has been set up. A better way would be for the individual to select a scheme from an authorised provider (in much the same way as for an ISA). The employee/employer contribution is paid into this account together with the tax relief and when the employee moves job, the new employer makes contributions into this account. There is then no small pot problem.

Steve Webb should look at the US 401k accounts which I think are a much better way forward.

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Philip Wise

Nov 14, 2012 at 17:28

Clearing house for employer contributions, so that the employer contributions goes into the members chosen pot is a much better idea. You could choose one pension and keep it for life then.

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Dan Rear

Nov 15, 2012 at 16:36

What about everyone having their own Pension Plan, why not call it a "Personal Pension"? They can keep it with them through their working life, and request their various employers over time save into it.

As long as it meets certain 'Government approved' standards, that would work wouldn't it.....

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