“I believe that eventually the same rules should apply to small defined contribution pots whether they are generated by automatic enrolment schemes or any other occupational pension scheme. Having one rule for an employee who is made to automatically enrol and another for a colleague who voluntarily joined his employers occupational pension scheme seems a little odd, although trying to deal with all historic small pots in one go would be a mammoth task and perhaps a step too far at this time.”
He continues: “I would argue that £20,000 is a small pot (though perhaps not in the way the Government would define one). Let’s take the case of an individual who has 5 such £20,000 pots at age 65 making a total of £100,000. On today’s figures with a half spouse’s pension and limited annual inflationary increases he could expect to get an annual pension of £3,000. In other words £20,000 buys you about £600 a year in pension, so it’s a small pot.
“I am pleased to see the Government is not including small pots held in defined benefit schemes in the proposed changes. Transfers of such pots would inevitably be into defined contribution receiving arrangements and this would not, in all likelihood, be in the best interest of members.”
He concludes: “Therefore whilst we support what the Government is currently proposing, and believe it is a step in the right direction, I believe it has far bigger challenges ahead to make automatic enrolment a success. Like the Titanic automatic enrolment is not unsinkable and the Government should not plough on recklessly. We would like to think that most of the crew are on lookout duty for the icebergs and not dare I say it blowing their own trumpet.”
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