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The DWP has taken a controversial step in opting for 'pot follows member'. John Greenwood reports
Last month pensions minister confirmed that pension pots will follow employees when they change job, potentially halving the number of dormant pots by 2050.
Dropping the aggregator model proposed by some stakeholders, the DWP said it had opted for 'pot follows member' because of the potential for reduced charges and because it is the most popular option with savers, according to ABI research.
But it is also being portrayed as a victory for commercial pension providers over a statist centralised approach. It is a decision that puts the Conservative/LibDem coalition, the ABI and several pension providers in the victor's corner, with Labour, the NAPF and a different group of providers crying foul.
Both sides' arguments have merit. Shadow pensions minister Gregg McClymont argues the 'aggregator' approach, whereby small pots would only be automatically transferred to low-charge trust-based arrangements, rather than following employees to schemes offered by commercial providers, would ensure better value for consumers in the long run. McClymont says: "This announcement is not the best deal for pension savers. Ministers must put the saver's interest at the heart of what they do. Steve Webb's proposals on...