22 December 2015
Facilitating the transfer of workplace pensions
The portability of pensions remains high on the Government’s agenda and the DWP has initiated a dialogue about dormant pots. Although there is a universal desire to simplify transfer, no single solution has emerged. VocaLink’s technology and expertise can play an important role.
Since 2012, the UK has instigated a programme of auto enrolment for workplace pensions. The aim is for individuals to build a personal pension pot during the course of their working life. While this is a worthy aim, it produces some administrative challenges. People change jobs more frequently than ever, with an average of 11 employments during their working life.
In practice this means that people accumulate several small pension pots, which increases the risk of loss or eroded savings due to the fixed costs attached to managing each pension pot. This makes small pots disproportionately costly to manage. Without further reform, it is estimated there could be up to 50 million dormant pension pots by 2050. Auto transfers can ease this problem and provide a cost-effective solution. There are already auto transfers in other industries, such as banking where we have actively played a part. The pensions industry can learn from this experience.
VocaLink provides the technology that drives the Current Account Switch Service (CASS) and the Cash ISA Transfer Service (CITS). These services facilitate the smooth, safe transfer of over one million customers each year. Our experience is highly relevant to the transfer of workplace pensions and we are keen to help.
To find out about the challenges and benefits of auto transfers of workplace pensions, download the discussion paper, Enabling Auto Transfer of Workplace Pensions and join in the discussion by contacting Josh Berle.