Pot-for-life posed to solve UK’s pensions problem

Employees could be given the power to choose their own pension provider in a move that could see the end of staff having to close one pension down and start a new one every time they change jobs.

A Ten Minute Rule Bill will be read in parliament and proposes to give staff the right to require their employer to pay contributions into a pension of their own choosing, rather than it going into a pension chosen by the company.

Anthony Browne, MP for South Cambridgeshire, has described the proposal as a “small reform that could, over time, be revolutionary, because if an employee moves jobs, they can keep the same pension, and get the new employer to pay into it, rather than being forced to set up another one.

But while there is theoretical support for the idea of a single pension pot, most urge caution.

Ian Bird, partner at Secondsight, had concerns about practicality: “It’s a lovely idea, but completely impractical. The problem that it’s trying to fix is the wrong one. Employees should instead be looking at how to identify which provider they choose when they come to retire, while in the meantime paying into the employer’s default fund.

“Lots of employers are now running financial education, but how can they do this, all their staff have different providers?”

Ahead of last October’s National Pension Tracing Day, data released by The Pension Policy Institute revealed there were ten of billions of pounds’ worth of lost pension pots that employees are missing out on as a result of closing down pensions and opening new ones each time they change jobs.

It found that since 2018, the value of lost pension pots in the UK had risen by 37%, to reach a total of £26.6 billion. More than 2.8 million pension pots are considered lost, an increase of 75% over the last four years.

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