Pot follows member approach in the best interest of consumers

Article date: 17 July 2012

Allowing workers’ auto-enrolled pension pots to automatically transfer to their new pension scheme when they change jobs is critical to the success of the workplace pension reforms, Aviva has said. 

A single industry framework to allow workers to simply manage their pension funds as they move from job to job during the course of their career will contribute to an improved savings culture in the UK.

Aviva has been a strong supporter of the "pot follows member" approach to pension transfers, outlined today (17 July) by Minister for Pensions Steve Webb (full report PDF (950KB)). It has called on the DWP and the broader industry to work together now to agree the most effective approach. 

Aviva is pleased that the Government will focus on allowing automatic transfers between automatic enrolment schemes. A "central clearing house" approach to pension transfers could provide a simple and practical way of matching workers’ savings from their old auto-enrolled scheme to their new auto-enrolled scheme when they move jobs.

On the question of limits, Aviva can see the merit of setting limits but would prefer for no limits to apply, as customers’ needs do not alter relating to the size of their pension pots. The system should be made to work, irrespective of the individuals’ pot size.

Advice currently plays a vital role for many transfers, due to the complexity of current pension models used. Aviva hope that customers will find advice much more accessible for transfers between schemes in the future, as aggregation of pension benefits takes effect.  

Aviva’s managing director of corporate benefits Graham Boffey said: “We acknowledge that there are a number of ways that pension transfers could take place and it’s good to see the Government has chosen to follow a ‘pot follows member’ design.

“We’ve always said that our preferred model is ‘pot follows member’, and using a ‘central clearing house’ to match old auto-enrolled schemes with employees’ new schemes is one place to start. 

“We believe it is critical we finalise the solution to this key issue as soon as possible so that we create the best environment for making automatic enrolment a success for workers as well as employers and welcome the Government’s intention to improve the current transfer system, in the first instance.  

“When we asked employees in our Working Lives* research about what type of engagement would make them save more for their retirement - key was knowing what they personally needed to save for their retirement. Employees are only going to be able to understand what they need to save for the future if they have a clear understanding of how much they have already put aside for their retirement. 

“We also know from other Aviva research** that two-thirds of people say they do not currently know what happens to their pension fund once they leave their employer, so we need to bridge this gap in understanding. 

“With automatic enrolment and millions of people joining a workplace pension scheme for the first time over the next few years, it’s important we do everything we can to get workers making informed decisions about how much they have to save for the retirement lifestyle they want.”

Summary of Aviva’s recommendations:

  • Allow automatic transfers between auto-enrolled pension pots to enable members’ retirement savings to “follow members” when they change jobs.
  • Aviva’s preferred model for auto-enrolment schemes is a central clearing house to match the old scheme with the employee’s new scheme.
  • Initially confine automatic transfers to automatic enrolment schemes – as they will meet minimum suitability standards and ensure adequate protection and broadly equal suitability for the consumer.
  • Legislate, and apply it retrospectively, to allow for automatic transfers from the start of auto-enrolment (October 2012) to smooth the way for simplifying the overall process for transferring non auto-enrolment pension pots in the future.

References to research:
* Working Lives Report PDF (1.90MB) – May 2012 – Aviva  and Opinion Leader research

  • 22% of respondents said they would save more for retirement if they were personally shown what they needed to save, compared to 12% who said they would do so if they were just shown how to manage their money better.

** Consumer research for Aviva – Q4 2011 – One Poll:
Key research findings include:

  • 71% of consumers said they thought it would be beneficial.
  • 64% of consumers said they did not know what happened to their pension fund once they left their employer.
  • 43% of consumers had between two and four pension pots.
  • 58.84% of consumers said they did not know the total value of all their pension pots.


If you are a journalist and would like further information, please contact:
Fiona Robertson - Aviva Press Office
Telephone: +44 (0)7800 692299
Email: fiona.robertson@aviva.co.uk 

Diane Mangan - Aviva Press Office
Telephone: +44 (0)7800 691714
Email: diane.mangan@aviva.co.uk

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